Risk Management 02 (Aug 15 - Dec 25)

[winston]

Three Rules to Survive a Bear Market

Real Money's James 'Rev Shark' Deporre lists the keys to making it through big downturns.

by BRIAN O'CONNELL

1. Forgo the Urge to Predict

Be skeptical of bounces, and don't be too negative when there is more weakness. Let it play out.

2. Operate From a Position of Strength

In a poor market, you must have cash, and you have to be able to sell and stay flexible. “It allows you to jump back in when you think the time is right, and it allows you to exit if your timing is wrong.

3. Don't Focus on Trying to Predict the Absolute Bottom

“What happens is that the bottom callers are always early, and then they create another wave of selling when they are trapped,” he noted. “From a strategic standpoint, it’s often better to be late than early to a market turn.

Source: The Street

https://www.thestreet.com/investing/thr ... _ven=YAHOO

[winston]

If you’re worried about a ‘black swan’ event sinking stocks deeper, here’s how to manage the risk

By Mark Hulbert

Russia’s invasion of Ukraine is pounding stock markets but it is not a rare black swan

Black swans in the stock market are sudden, awful, unpredictable and extremely rare — such as a market crash.

They are not “any bad thing that surprises us”.

Russia’s invasion of Ukraine — does not qualify.

Allocate a small portion of your equity index-fund portfolio to out of the money, long-dated put options.

Another is to invest the bulk of your equity portfolio in U.S. Treasurys, and with the balance purchase out-of-the-money call options.

Source: Market Watch

https://www.marketwatch.com/story/if-yo ... eid=yhoof2

[winston]

How to Handle Your Investments During Wartime

by Marc Lichtenfeld

1. Assess when you need the money you’ve invested in the market.
2. I especially recommend buying dividend stocks when markets slide because you get a higher yield on your money

Source: Wealthy Retirement

https://dailytradealert.com/2022/03/10/ ... g-wartime/

[winston]

US Treasuries, Japanese yen, gold – are any still safe havens?

Hawkish central banks and the possibility of extended lockdowns in Chinese cities have adversely affected sentiment

The rise in Treasury yields, the yen’s depreciation and the erosion of gold’s value by inflation, means investors need to consider their options carefully

by Kerry Craig

The Bank of Japan holds almost half of all Japanese government bonds, almost 80 per cent of exchange traded funds, and 7 per cent of Japanese listed stocks.

Source: SCMP

https://www.scmp.com/comment/opinion/ar ... gn=3175676

[behappyalways]

Hedge Fund CIO: "We're On Our Own Now, Without A Fed Safety Net. It's A Sobering Reality"
https://www.zerohedge.com/markets/hedge ... ng-reality

[winston]

How to Defend Your Portfolio in a Bear Market

by DANIEL KUHN AND KATHERINE ROSS

I think a lot of cash available not only insulates you from down moves and increases in volatility, but it also allows you to have some dry powder-- or when opportunities come up, when the markets sink or-- and positions get downwards in a way, that we want to be able to pick up some new added capital risk.

We have instituted some protection-- meaning playing some defense with the PSQ (ProShares Short QQQ ETF) and SH (ProShares Short S&P500 ETF).

Source: The Street

https://www.thestreet.com/video/how-to- ... r%2BMarket

[winston]

How to Protect Your Portfolio During a Recession

by DANIEL KUHN

Built up our cash levels. We took more defensive positioning, not just with the inverse ETFs but we were looking for companies that consumers are going to use their products and services no matter what.

There's also some long-term demographic, as well as thematic drivers that are out there. And, you know, we try to capitalize on where we saw bright spots, either in the overall economy or because of other factors that are out there.

Case in point, and I think we touched on this yesterday, you know, the Biden infrastructure law, you know, the real push towards accelerating the EV transition, the need for charging stations, those sort of things

We're trying to look ahead, you know, on a 3 to six month window, even though we like to hold stocks for 12 to 18 months.

Source: The Street

https://www.thestreet.com/video/how-to- ... BRecession

[winston]

Some Big Investors Are Aggressively Preparing for a Major Stock Decline

By Steven M. Sears

Some institutional investors are aggressively preparing for a major stock decline. They are consistently buying VIX call options that would increase in value if the VIX spiked and the S&P 500 index plummeted.

Recently, Susquehanna’s Chris Jacobson advised his clients that an unnamed investor bought about 130,000 March $24 VIX calls and about 165,000 March $26 calls.

Source: Barron's

https://www.barrons.com/articles/invest ... eid=yhoof2

[winston]

Yes, We’re Heading for a Recession — Here’s How to Protect Yourself

by Shah Gilani

here are deep-rooted problems in America’s banks that are exponentially complicated by persistent inflation.

The combination is going to keep rates elevated no matter what the “terminal” rate on fed funds is, and it will lead to another round of bank failures and a credit crunch starting in the second half of this year.

Problem #1: Unmatched Books and Depositor Demand
Problem #2: Overborrowing and the Credit Crunch

What You Need to Do Now

The first step is employing tight trailing stops. I’m talking about a range of no more than 5-10% but you’ll need to take volatility into account.

Second, be careful about betting on banks recovering and getting drawn into their “cheap” shares when they look like they’re bouncing. It’s a head fake, and if you play it straight, you’ll lose.

Source: Total Wealth

https://dailytradealert.com/2023/04/01/ ... -yourself/

[winston]

How to Manage a Losing Position: Explained

by Francesco Casarella

Losses on ETFs

Considering the logic behind the purchase and the percentage of the total portfolio allocated to the ETF is essential. If the investment is strategically positioned as part of the equity portion of the portfolio (e.g., S&P 500, Nasdaq, iShares MSCI World ETF (NYSE:URTH), Euro Stoxx 50), two options may be considered: either adding to the position during declines (if aligned with the overall strategy) or patiently awaiting a recovery.

However, both scenarios assume an initial investment horizon of at least 8-10 years and an understanding that markets can experience downturns.

Losses on Individual Stocks

Assess the weight assigned to each individual stock in the portfolio and the analysis conducted on those stocks. Was the purchase based on equity strength, earnings, or future growth? Did you establish a target price and a buying strategy?

These questions should have been addressed before investing. Let's say a stock is down 50 percent, but it represents only 2 percent of the portfolio (due to proper diversification).
The impact on the overall portfolio would be just 1 percent, which is manageable.

However, if you mistakenly allocated 50 percent of your capital to that single stock, the impact would be a significant 25 percent loss on the total portfolio. In such cases, it becomes crucial to consider the following:

If, during a situation, you find yourself asking, "What do I do now?" you're doing it wrong.
Indeed, let's consider a scenario where you are experiencing a 30 percent loss on a stock. However, if this decline is consistent with the performance of the sector and the broader market, it is advisable to conduct a fresh evaluation of the stock.

Assess its fundamental aspects to determine if it still exhibits positive characteristics. You may not need to change your position if the stock remains fundamentally strong. You might even consider increasing your investment in the stock.

Regarding money management, one crucial consideration is determining the initial position size for each stock and understanding the reasons behind it. Why did you choose to allocate a specific amount to a particular stock? It's essential to have a clear strategy in mind.

Source: Investing.com

https://www.investing.com/analysis/how- ... s_headline