We continue to witness extreme volatility as stock markets around the world deal with significant economic stress.One of the underlying issues is that markets are deleveraging after the accumulation of enormous debt. The bottom line is that the US, Eurozone and other developed economies have too much debt relative to their productive output.
Interestingly we have noticed a trend of increased globalization, which has resulted in developed nations closely tracking one another. This has investment implications because numerous countries now move in tandem with good or bad news, whereas before simple diversification meant portfolio volatility was minimized.
We wanted to let you know our latest thoughts and action.
At TriDelta Financial our Investment Management partners have always been proactive in managing risk, which they have done by:
- avoiding the US and Euro markets for over 6 years now and remain 95% invested in Canada.
- hedging portfolio risk a number of times over the past few years.
- benefiting from significant gold and silver investments.
- successfully raising cash on numerous occasions, but particularly through mid 2011 as global economies continue to deteriorate.
They are now extremely defensively positioned with portfolios holding significantly reduced equity, between 15 – 25% cash combined with the safety of gold and/or silver holdings as a hedge.
The ongoing deterioration of global economies and growth is being reflected in lower and more realistic company valuations (stock price). As this unfolds they will maintain defensive portfolios to preserve client capital and wait patiently for the dust to settle as they scour the market for opportunities that invariably emerge in times of turmoil.