Simplify, Get Short On The Curve And Swing For The Collars

Apr. 09, 2014 4:46 PM ETAGG, DBC, EEM, EFA, GLD, HYG, ILTB, ISTB, IWM, OIL-OLD, PFF, SLV, SPY6 Comments
Edward Hoofnagle profile picture
Edward Hoofnagle


  • The yield curve has flattened despite Fed announcements to reduce QE.
  • Precious metals and commodities enjoyed a strong quarter.
  • Equities continue making all-time highs, albeit with volatility.

Sometimes when I read the forecasts from bearish investment managers, I think it's time to sell all my stocks and hide out until the storm passes. And yet, as the financial advisor and investment strategist, I am supposed to provide the steady hand and confidence to remain invested during the ups and downs of the market. But as I look back on the quarter, and look forward for the remainder of the year, there are a few data points that bear particular attention - some are quantitative, others are qualitative, and they will have an impact on the positioning of the asset allocation. And yet, the basic questions are simple:

  • Are we at a top?
  • Should we modify the asset allocation?

As a note of caution, I feel like I have predicted 8 out of the last 0 market tops over the recent market cycle. The fact is, no one definitively knows when the top occurs, and yet, we look at evidence to try to gauge whether we should be fully invested or less than fully invested so as to preserve some of our capital in the ugly times - and there will be ugly times, there always are. If we jump too early, as I have been prone to do, we look at the gains and feel a sense of lost opportunity (See "Sitting on the Fence"). If we jump too late, we will suffer the financial penalty of inaction. And if we try to "time the market," we end up missing the gains and eating the losses - the worst of both worlds.

Update on Model Portfolio

As discussed in an earlier article, the asset categories that underlie the investment allocation are as follows:

  • Money Mkt- Example SWBXX or similar - yield is pathetic .01%
  • AGG - iShares

This article was written by

Edward Hoofnagle profile picture
Edward Hoofnagle founded and sold a variety of companies in the technology and consulting industry, and currently manages an investment portfolio of private companies. Ed also provides business advisory services and offers interactive seminars for entrepreneurs and family offices related to financial literacy and charitable planning.

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