Kind of Quiet–a Good Time to Review Holdings

Nomadicmist reminded us today, on the Sandbox Page, that while the stock market continues to ‘party on’ there is plenty to worry about in the world.

Nomad points to the recent downgrade of the Global Sovereign Outlook to NEGATIVE by Moodys for 2020. Essentially Moodys has been downgrading a number of countries lately and doesn’t see the economic outlook improving–and maybe getting worse in the year ahead.

A reuters article on the Moodys action can be found here.

Neither Nomad or me are predicting anything at all–we all know the global economic outlook is tenuous, but just suggesting that while markets are kind of quiet it is a good time to review holdings.

We all know “black swans” are lurking–are you holding what you want to hold if a BS appears?

9 thoughts on “Kind of Quiet–a Good Time to Review Holdings”

  1. Nomadicmist says:
    11/13/2019 at 11:59 pm
    Of great interest to everyone concerned about their income portfolio:
    Credit rating agency Moody’s has issued a Worldwide Debt Downgrade Warning due to deepening global geopolitical uncertainty and risks. An unpredictable political environment, lower growth and heightened recession risk, and weakening institutions and their credibility all contribute to this negative outlook. Moody cited fears that political turmoil around the world threatens the global economy, and this threatens government debt. Political turbulence is also worsening a slowdown in global growth. That in turn aggravates structural bottlenecks of massive banking and sovereign debt and increasing the risk of economic or financial shocks. At the same time “populist” movements are undermining domestic policy and weakening government institutions and compounding social risks. I don’t recall they’ve ever done anything like this in the past…
    Here is the link
    https://www.zerohedge.com/news/2019-11-13/world-debt-downgrade-warning-moodys
    Wishing you profitable investing, Nomad

  2. I was giving blacks swans more thought in light of my love of utilities. Which got me thinking about an EMP (electro magnetic pulse) which would destroy electricity transmission infrastructure. Would this basically bankrupt most of the utilities? Even if they are insured for the infrastructure, consumption of electricity would be crushed so revenues would no longer be able to support interest payments.

  3. Have to say, the mix of latest intel, knowledgeable perspective and self-deprecating humor in this thread just sums up why I check in with III almost every day. Tim, the site just keeps getting better and better. Kudos to you.

  4. i could’ve spent the past 5 or 6 years being prepared for a black swan. And I would’ve missed out on more profits than the amount I would lose in a black swan. So No, I don’t go overboard preparing for disaster. The small concession I’ve made is buying fewer risky assets and more conservative assets that won’t plunge as much.

    1. Martin G–you are exactly correct. We could have buried it all in the backyard in 2009 and we would still be waiting for a global disaster. On the other hand I continually review and try to position for maximum return with minimal risk with most the money and then an allowance which I use for flipping and dividend capture.

  5. Tim,
    Real good food for thought.

    Is there really ANY preferred at all that you would like to hold if a BS appears? Even treasuries may not be safe if interest rates jump, nor some money market funds. Just cash under the mattress (and even this is bad if high inflation kicks). It seems that in a BS, the best is not to have any assets nor any $…. jj

    It would be wonderful if you could describe which of the preferreds that you own (or in your model portfolios) you think they might hold better and which are likely to be demolished in a BS.

    That is: do you have a “warning” list of preferreds that (if given time to do so) you would be selling at first signs of BS? And conversely, do you have a list of preferreds you would hold no matter what?

    Thx!

    1. “Is there really ANY preferred at all that you would like to hold if a BS appears? Even treasuries may not be safe if interest rates jump”

      Canadian reset investment grade regulated utility preferreds. They will adjust if there is an interest rate shock black swan. Or if there is a deflation black swan or financial crisis, I’d trust regulated utilities not to go bankrupt over any other industry. My favorite are the preferreds from Fortis.

      Also, I like the international diversification just in case political BS appears.

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