June 27, 2016
I never understand the lack of urgency among the investment management world. When there is a fire you don’t wait around testing to see just how hot the flames will be. You get the heck out of dodge! Sure, the alarm can be false and you may meander right back into the building again picking up where you left off, or maybe, the flames will be life altering and your immediate action will be what makes all the difference.
The year had been moving along just peachy. After having navigated the collapse in January, we caught a nice bounce and took profits in the early stages of the rally. As things started to improve, for what looked to be a bigger break, we started building inventory and making up some nice gains along the way. The Fed held off, markets rallied and I left the office last Thursday with Brexit polls showing an EU still in-tact and futures indicating a beautiful Friday. Then things changed.
I was enjoying the Cincinnati Reds game, checking my phone periodically, when all of a sudden the currency markets lost control and the British Pound crashed. Immediately I knew what was happening.
Regardless of ones system and methodology by which capital is protected, losses are never fun and Friday proved once again just how painful an abrupt decline can be. We watched positions closely and amazingly nothing was stopped out. Today however, that changed. The market has continued to sell off as it digests just what will happen with the European Union and unfortunately, prices are such that stops must be taken and cash raised. The fire is hot and I’m not sticking around to wait and see just how things pan out.
We’ve spent the day selling down positions and raising cash. We will end the day with over 50% of our assets in our aggressive accounts in cash and the remaining allocated among our stodgy blue chips with a sizable position in Silver. We may very well be kicking ourselves for this abrupt change in positioning and have to re-enter the market once again, even possibly higher than here but I will take that risk and not be in any rush to redeploy capital. My main goal is to protect and preserve and now we can sit and wait for a better opportunity.