Risk Management 02 (Aug 15 - Dec 25)

[winston]

Why Stock Market Despair is Coming… and How to Protect Yourself

by Adam Galas

The bond market, the “smart money” on Wall Street, is predicting a recession by July 31, 2024 with 100% probability.

The later the recession starts, the higher earnings will be before they fall.

If you try to avoid bear markets entirely, you are almost sure to fail and kill your financial dreams.

If you were not in the market when the market bottomed, you would have lost all your money.

Market timing is the single-greatest killer of rich retirement dreams in history.

So to protect your wealth, stay in the game and don’t buy overvalued stocks in this market.

So right now, hang tight. Because it’s about to be a wild ride.

And trust the high-quality companies that you have in your portfolio to lock in your profits…

Source: Wide Moat Research

https://dailytradealert.com/2023/06/30/ ... -yourself/

[winston]

5 reasons investors should start preparing for stock market losses

by Matthew Fox

Investors should take advantage of the recent rally in stocks and prepare for losses by buying insurance, according to Goldman Sachs.

1. "Downside protection is attractively priced."
2. Narrow market rally suggests drawdown risk is elevated.
3. Valuations are high in absolute and relative terms.
4. Equities already price an optimistic outlook.
5. Positioning is no longer a tailwind to equities.

Source: Business Insider

https://finance.yahoo.com/news/5-reason ... 58852.html

[winston]

Protect Yourself Now — While a Crisis is Still the Last Thing on Anyone Else’s Mind

by Dan Ferris

A “Minsky moment” is a crash that happens after an excessive debt buildup.

Prepare, don’t predict…

First, hold cash.

Next, buy quality and avoid junk.
We find companies using five essential traits of high-quality businesses: gushing free cash flow, consistent margins, good balance sheets, shareholder rewards (that is, dividends and share repurchases), and high returns on equity.

Finally, buy value stocks and sell short pricey growth stocks.

Source: Daily Wealth

https://dailytradealert.com/2023/08/12/ ... lses-mind/

[behappyalways]

Which Countries Have The Highest Investment Risk?
https://www.zerohedge.com/markets/which ... tment-risk

[winston]

"Risk is good. Not properly managing your risk is a dangerous leap."

- Evel Knievel

[winston]

Complacency Kills

Risk comes fast and hard with very little warning. Almost two decades after the financial crisis, I have yet to forget what true despair felt like, and I hope I never do.

by Carley Garner

The reward for holding an asset is often slow but risk comes fast.

Source: The Street

https://pro.thestreet.com/investing/com ... m_content=

[winston]

3 Steps To Protect Yourself From The Government’s Incompetence

by Marc Lichtenfeld

1. Own gold
2. Own healthcare stocks
3. Own short- to intermediate-term fixed income

Source: Wealthy Retirement

https://dailytradealert.com/2024/08/21/ ... e_vignette

[winston]

Paul Tudor Jones: “Don’t focus on making money; focus on protecting what you have.”

Benjamin Graham: "The essence of investment management is the management of risks, not the management of returns."

Charles Ellis: “If you avoid large losses with a strong defense, the winnings will have every opportunity to take care of themselves.”

David Dreman: “History constantly demonstrates that investors are prone to adhere to the dictates of greed and fear. The way to wealth is not just to make money, but to avoid loss.”

Seth Klarman: “The best investors…focus first on risk, and only then decide whether the projected return justifies taking each particular risk.”

[winston]

Most CFOs say now is not a good time to take risks (Axios)

What’s our take?

Less investment and risk-taking could be the canary in the coal mine for an economic slowdown.

Only 12% of CFOs said that now is a good time to take greater risks.

This survey was done in July, around the same time as the political turmoil and assassination attempt on presidential candidate Donald Trump.

Since we’ve now received a 50bps cut from the Fed and there is less uncertainty around the US election, these figures may be very different.

While it can be volatile due to unforeseen circumstances, keeping your finger on the pulse of how eager or reluctant big companies are to invest is a good proxy for guidance on economic activity.

Source: Simply Wall Street

[winston]

Now is the time to ask: How much market risk can you take?

by Nir Kaissar

People don’t think about risk much in a rising market. And when they do, they don’t focus enough on the essential question: How much of my money will evaporate in a crisis?

Every crisis has ended with a market recovery, and usually sooner than anyone expects.

The harsh reality is that an investment in the S&P 500 Index will get cut in half several times during an investing career. There have already been two such episodes since 2000 around the dot-com bust and the financial crisis.

A portfolio allocated 60 per cent to the S&P 500 and 40 per cent to the Bloomberg US Aggregate Bond Index would have been down 28 per cent from November 2007 to February 2009, including dividends. A more conservatively postured 40/60 stock/bond portfolio would have still been down 17 per cent.

The solution is to build portfolios with drawdowns specifically in mind. Here’s an easy way to do that: Multiply the first number of your percentage allocation to stocks by four and then five. The resulting two numbers represent, in percentage terms, the range of likely decline in a severe downturn.

Source: Business Times

https://www.businesstimes.com.sg/opinio ... n-you-take