Tuesday Target | 3/52
De-Risk, Hedge, or Hold?
Investors keep asking me how to handle the current overvaluation of U.S. companies relative to GDP, sales or earnings. De-risk, hedge, panic—or what?
Here’s what I think: If you’re a long-term investor, keep your cool. Stick to the basics: invest consistently, hold for the long haul, and diversify—equities, tactical income, commodity trend, gold/Bitcoin, and a smart volatility edge like MacroDozer.
But if you’re chasing returns beyond 8–10% per year, forget conventional wisdom. Dump the celebrity soundbites and legacy media chatter—all of it. Instead, focus on building a disciplined, rules-based strategy. Let modern tools and hard data drive your decisions.
As for hedging a traditional, diversified portfolio? It’s a pricey recipe for mediocrity. Want smart volatility as part of that portfolio? You know where to find us.
Here’s the least you need to know to get a feel for what’s cooking:
A Transition For Equities
We are in a choppy phase where the old playbook—easy money fueling big gains—has expired. Sharpe ratios soared last year, but that trend could moderate if policy remains tighter for longer. Slower yet persistent growth might keep the broader market afloat, but with volatility elevated. Tactical agility will be key, as the next bull leg likely requires more clarity on both fiscal and monetary fronts.
Inflation Risks Heat Up
Hot producer prices and rising wages suggest the latest CPI print could spark fresh inflation anxieties, with long-term expectations at multi-year highs. Even if headline rates stay controlled, sticky components—like rent—could keep prices elevated. Meanwhile, China’s rising money supply hints that Beijing’s stimulus might soon turn it from a deflation exporter into a global inflation driver.
Buffett’s Billion-Dollar Worry
Warren Buffett’s Berkshire Hathaway is hoarding more cash than at any point in the last three decades. The elephant in the room: frothy valuations, especially among mega-cap stocks. Buffett’s favorite yardstick, total market cap to GDP, is hovering near historic highs. The concern? Prices are too far ahead of real economic output, raising the risk of a correction if earnings growth falls short of lofty expectations.
Get Rich Overnight with Options? Yeah Right...
TUESDAY TARGET: One simple rule: only trade when there is a trade. No good setups in the past two weeks, so we didn’t trade. If you missed it, check out our 2024 Portfolio Review below.
Please note, all content is for educational purposes and isn't personalized for individual portfolios or financial advice. Curious about putting any of these ideas into action? Juri von Randow is here to offer guidance or connect you with the right resources.