Wednesday, November 7, 2012

Post Election Update

Now that the noise of the election is behind us, it's time to get down to business.  The fiscal cliff comes into full view now.  Most likely congress will make some minor concessions on each side of the party line that gets the ball rolling, and leave the bulk of the issues that need to be addressed for sometime in 2013.  This uncertainty will probably weigh heavily on the markets over the next several months.  That's not to mention what could happen in Europe.  That's also not to mention a business cycle that is getting long in the tooth.  We are in year 4 of the business cycle expansion.  Since 1950, only once has it expanded 6 years, never more.  Twice it has expanded for 5 years, with the majority of them being 1-3 years.

I concede that the market may well still move higher in the coming months ahead, or simply be range bound, but I am adamant in my belief that one should be in a very conservative stance going forward. The downside is much larger than the upside, in my opinion.  I'm not advocating being out of the market completely.

Suggestions for a basic model portfolio are as follows:

20% or higher cash position.

Little to no exposure to U.S. Small Cap Funds.

Low exposure to U.S. Mid-Cap Funds.

Overweight in value and dividend funds.

Standard exposure to Large Cap Funds.

Standard exposure to Bond Funds, but quick on the trigger with government bonds, and more weighted towards corporate bonds.

10% maximum exposure in emerging markets or international funds.

10-25% in a long/short equity fund.

MFADX(MFLDX)  Marketfield recently changes their structure.  They now have higher minimums.  Again, I really like this fund for a couple main reasons.  The manager was named manager of the decade in the 90's.  He has a thorough understanding of the debt super-cycle that we are in worldwide, and played the market better than anyone I know.  He greatly minimized downside risk in the crash of 08, AND greatly participated  and outperformed the rally of 09.  The manager can go long and short anything and everything.  I love that flexibility.

BPLEX-Another great fund in the long/short equity space.  Has a much lower minimum.  This one hasn't been as consistent through time, but has been outstanding over the last few years.

*I am not a registered investment advisor.  Please consult with a professional when making investment decisions.  This blog is strictly for educational purposes.

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