Some portfolio allocation and market perspectives from Janet Tavakoli:
I just went to (almost) 100% cash in my favorite hedge fund, my personal portfolio. I do not give investment advice, and I rarely discuss my personal portfolio (except with a select few friends), but I am happy to share my thinking on this decision.
On Monday, Austin Goolsbee, one of President Obama’s economic advisors, told The Daily Show’s John Stewart that the large deficit is necessary, TARP backed us away from the brink of disaster, and the stimulus is working. If only words were magic. Many more banks are in trouble, a chunk of housing activity is due to foreclosures/short sales/resales (the $8,000 housing incentive often went for down payments from people who couldn’t scare up one of their own), credit card problems are on the rise, one-quarter to one-third of all mortgages in the U.S. are underwater, the mortgage “modification” program is a failure with only around 200,000 done so far—half of which are already failing (the same fraudsters who got us in this mess are modifying mortgages), 3,000,000 mortgages are in serious default (90 days or more past due), the unemployment picture is grim, the cash-for-clunkers fake auto stimulus is a non-green short-term artificial pump-up, profits seem due to inventory management and cost cutting rather than demand, and industrial production has plummeted (other than military production which is up). More TARP money will be needed for many smaller banks that are in trouble due to current and coming loan losses. The international picture is mixed, but I’ve even liquidated those positions.
The recent stock run-up since March in the U.S. has been lovely. We may see a continuing rally for the coming weeks. As many others have noted, the stock market often rallies ahead of a real improvement in the economy. But after Labor Day, people will come back to work and begin evaluating. I expect a huge downdraft in prices in the next couple of months, which may (or may not) create another buying opportunity.
Tangentially, when is Janet going back to CNBC? We all miss those Janet v Charlie witty and sophisticated debates.