Ron Muhlenkamp’s quarterly letter included a “watch and worry list” similar to my “excessive risk” list. As readers likely know, I like to keep a close eye on these potential black swan areas of the market. Avoiding these major blow-ups is one of the keys to investment success. Those who didn’t heed my warning on silver prices in April likely know what I am talking about….Muhlenkamp’s current “watch and worry list”:
“Meanwhile, China is raising interest rates and slowing its economy on purpose, much like we’ve done in the past. And Europe is grappling with problems somewhat similar to the U.S., but at a more advanced stage. Some countries, (not just states), are bankrupt. European banks are major lenders to European governments, putting them at risk as well. While we don’t expect a meltdown similar to the subprime lending and Lehman Brothers debacle that hit the U.S. in 2008, (partly because everybody is aware of the problems in Europe), the risk cannot be ignored.
So our “watch and worry” list remains:
1. European government debt and banking problems;
2. China’s slowdown which could become a “hard landing” or recession;
3. The ongoing U.S. political/economical debate on taxes and spending;
4. We do see improvement in some U.S. states, which are coming to grips with government spending at the state level.”
Source: Advisor Perspectives