Archive for December, 2009
Investing Today? Liquidity Above All!
By Marek W. Stupka | December 12, 2009
The deepest pit of the recession seems to be over now and the markets, with DJIA lingering just above 10,000 and gold falling almost 10% since the beginning of 12/09, seem to hesitate about which direction to go. What on earth should a global investor do at times like these?
Here’s a grand idea. For clues on how this investment situation is perceived by the wealthiest people of our planet let us look at the high net-worth investors and their views on their current investment strategy.
Throughout 2009, several extensive surveys have been performed among some of the wealthiest individuals on the planet on what investment strategy/strategies they are using when it comes to managing their money. The Economist Intelligence Unit was commissioned by Barclays Wealth to survey 2,000 wealthy individuals around the globe and published a paper called “New Horizon, New Behavior” in September 2009. Most recently, the Family Office Channel, an exclusive group of advisors and wealthy families surveyed 100 advisers on current investment attitudes.
The findings across all surveys were consistent - wealthy clients are returning to a much more conservative money management style. But hey, that’s not all! They also plan to stay this way for the future. In other words, they are increasingly skeptical of highly complicated products like structured notes and hedge funds and are concentrating on plain vanilla liquid investments like bonds, stocks, ETFs, commodities, and currencies. Rather than use complicated option strategies to hedge the risk of a financial meltdown, they were turning to an old favorite - cash.
This - among many of the wealthiest people of our time - has led during the recent months to investing their vast monetary resources in the currency markets, or the FOREX, since we all know that SPOT FOREX IS THE MOST LIQUID MARKET IN THE WORLD. In the beginning of this year it was the greenback many poured their money into. After the March/April market meltdown (and dollar rebound based on the “return to safety” approach), however, investors swapped to other currencies, especially Euro and the Australian dollar.
I get asked by traders worldwide what is it that I prophet for the markets to do next. Gold has already posted a strong correction, drawing other commodities, as well as some of the currency majors with it. Should this mean that we are at the very dawn of another market meltdown, or a “government bubble burst” as some chronically bearish analysts would proclaim so boldly?
Well, I know for many of the hedge fund and portfolio managers out there the idea of another meltdown seems to be incredibly appealing. The reason? Once a bubble bursts out, as it did in September 2008, it is very easy for bears to ride down with the rest and make money on the implied panic. Why? Because of one of the very essential human emotions=fear. Fear, my friends, was the reason why many bears were able to make millions on the 2008/2009 crunch with a very little risk attached. Oh, when a blood-thirsty bear gets his tasty filling once, he simply wants more as soon as his stomach gets empty again.
P.S. Note that there is no doubt in my mind that what we are witnessing right now is not another bubble burst, but just a temporary market correction, and that the global recovery is already underway. I am am definitely a bottom-up investor and like to make money on the progress instead of on the fall. In any case, however, global investors should get ready for a bumpy road towards the 2010, with volatility and market risk being extremely high. For the most cautious of you out there, I recommend to stay on the sidelines, or even get away from the hustle and bustle of the city (applies in case you live in one) and visit a beach resort. For those who like to profit on high volatility, we have 3 trading systems proved to bring forth consistent profits even at times of uncertainty. On this blog page, I plan on posting (apart from a Christmas wish) another simplified tech analysis post till the end of the year. Always remember - your questions and observations are welcome at my email address marek@gepardinvestments.com. HAPPY TRADING !!
Topics: Miscellanous | 7 Comments »