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GMO's Montier Shifts To 50% Cash, Sees 3 "Hellish" Scenarios For Markets
"This is definitely the most difficult time to be an asset allocator," warns GMO's James Montier, telling conference attendees in Munich that he hasn't been this risk-averse since 2008. Having warned six months ago that "stocks are hideously expensive...in a central bank sponsored bubble," Montier sees three different "hellish" scenarios and as CityWire reports, warns investors, "I think it's best to stand a bit and hold onto some dry powder," despite the groupthink idolatry being practiced around the world.
"This is definitely the most difficult time to be an asset allocator. It’s very hard to find value," Montier told Citywire at the Value Intelligence Conference in Munich, an event hosted by Value Intelligence Advisors (VIA).
The fund manager recently cut his equity exposure to US 'quality' names and, as such, has upped cash in his Global Real Return fund. He currently holds 20% in liquid assets, i.e. cash and derivatives, while a further 30% is invested in fixed income.
"2007 and 2008 we had about 80% of the fund in non-risky assets. This has been the first time since that we have had over 50% in very liquid assets," he said.
And various levels of hell are on their way...
Montier said he is currently breaking up his market view into three different 'hellish' situations.
Firstly, there is a kind of 'stable' hell, for Montier this is the worst and least likely situation, where rates stay low over a long period and volatility and as such entry opportunities are minimal.
Then he describes something near to purgatory, which, Montier said, is the most helpful environment for investors. This is where he sees the market still moving between a low interest rate and a rising interest rate scenario.
The final of the three scenarios is an ‘unstable’ hell, where the market goes in one direction but keeps getting back off of course.
"I can't tell you exactly how it is going to work. We may see US rates rise in the autumn but I wouldn’t take it for a given."
So where to invest?
His recent cut in US equities included exiting stocks such as Proctor & Gamble and Microsoft, which he sold on valuation grounds.
"We still see these names as a relatively good option for equity investors but as we are value investors, we decided to cut them back a bit as they were getting expensive and so we’d rather hold cash."
One area where Montier thinks there is still opportunity to select find value is in the emerging market space. Here he has added to names such as Russian oil and gas major Lukoil and Korean telecoms group Samsung.
But ultimately, Montier has strong words for investors...
"Investors are constantly asking me how long I’m going to keep the cash position and what is going to be the ultimate trigger for reducing. I can’t say that, it does worry me if we are in this stable hell environment but at the moment, I think it’s best to stand a bit and hold onto some dry powder."
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Pure genius...no wonder this guy makes big money! " it's going to rain..maybe I'll bring an umbrella"
Brilliant!
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I'll give you $100 to Fck off and die.
Gosh, that's $2738/month. Should just about cover your BMW payment and a couple happy meals. Don't get ketchup on the seats. The repo company doesn't like to have to clean up your messes.
Hey man, turning tricks all night in a Beemer is pretty messy, too, (if you know what I mean). Cum stains aren't as bad as ketchup, but the sheer volume makes it pretty bad.
$87 bucks an hour, though. What's a girl to do?
Holding some dry powder is always sage advice.
Has anyone ever recommended ditching dry powder or holding the wet stuff?
"We may see US rates rise in the autumn but I wouldn’t take it for a given."
Wow!!
That is exactly what the banksters are going to do.
You will see.
Liberty is a demand. Tyranny is submission..
Never apply logic in trying to understand power's machinations, apply the power and psychopath motivation triad: "Money, power, and greed (And sex with kids)"
Never attribute to incompetence or stupidity, that which can be blamed on psychopathy.
Valuations...fundamentals?...lol...here is one of them! Arrest him immediately! ANY stawk market is only ALLOWED to go up!
Haven't you ever heard of limit down? Ever wonder why that is?
Its called a "free market" ;-)
WTF? This doesn't even make any sense.
"The final of the three scenarios is an ‘unstable’ hell, where the market goes in one direction but keeps getting back off of course".
I'm with you. I prefer my hells stable also. Prosperity for a more stable hell!
This has been the first time since that we have had over 50% in very liquid assets," he said.
Gold bitches...
Welcome to the party pal.
Yeah, I got your liquid assets right here, pal...
Amazes me that these guys get paid big bucks to speak,when the people that hire them know there not going to tell them what there really thinking or doing...
So many are waiting: for what? If you have not by now figued out where things are going you will not take the fruits of the next harverst.
He was 80% cash prior to 2008 meltdown. Sounds like promotional BS.
Like I've said time and time again, no one has a clue what's going to happen next. It's seems as though ZeroHedge searches for the globe for most bearish people out there and they write these articles saying that the market is going to crash, etc. It's no different from CNBC marching out perennial bulls spouting nonsense about how cheap the market is. Whatever happens is going to happen, just make sure you're on the right side of the trade.
but...what's going to happen?
Debt too big.
People, towns, cities, counties, countries, planets will go bankrupt. Ya!
It is better to be bearish than blind. It does not take a giniuse to understand the mess we're in. You seem to think that the torrent toxic liquidity has any relevance to real money and wealth
Of course people know what is going to happen. You can tell when it is going to rain can't you. You can tell when your mate is going to have sex with you can't you. To say know one knows about markets is a sure sign that you should not be investing your hard earned money. You are the mark at the table.
JLM, damn near threw my dinner up.
You have sex with shielas, and drink with your mates, OK.
And to all my web footed friends and creatures from the swamp. It is my sincere wish for you all to participate and invest in the upcoming futures fund so that you and your families will also experience the subsequent rewards and benefits.