Posted on 05/04/2022 3:16:19 PM PDT by blam
David Wright is known for his ability to lead his funds through periods of intense volatility, like 2008, where his fund nearly broke even on the year while the major equity index shed half of their value. His losses during the COVID rout of 2020 were also relatively mild.
But those market ructions will likely be remembered as relatively staid in comparison to the selloff that’s just around the corner. According to Wright, who shared his thoughts on the market during an interview with Bloomberg, both of these periods – along with the dotcom crash – both had nothing on the crash that lies ahead.
Much more pain lies ahead, according to the 78-year-old.
“I believe we are in the biggest bear market in my life,” said Wright, co-founder of Sierra Investment Management, which oversees about $10 billion. “This is just the second inning. A lot more to come.”
Of course, there’s market pain pretty much everywhere you look today: The S&P 500 has already lost 12% this year, while the Nasdaq has tumbled into bear market territory after sliding more than 20% from its peak in November. Key bond benchmarks are down more than 10%.
Wright’s fund is presently invested mostly in cash, but also a range of other assets including foreign stocks and master-limited partnerships.
The $869 million Sierra Tactical All Asset Fund – a so-called fund of funds that invests in mutual funds and exchange-traded funds, held less than 3% of its assets in US stocks as of the end of April.
More than half of the fund is in cash. Fixed-rated bonds accounted for only 1% of its holdings, while commodities made up more than 9%.
The rest of the portfolio is spread across assets including floating-rate bonds, foreign stocks and MLPs.
So far, the fund has lost just 2.3% in 2022, beating 91% of its peers tracked by BBG.
The problem is that the US and US investors have bet so much of their net worth on stocks: “There’s no other country on earth that has staked so much of their net wealth in stocks,” said Wright, who co-founded Sierra Investment with Kenneth Sleeper in 1987. “But we are at a very big peak of complacency.”
The Sierra fund uses computer models which Wright manages with two colleagues. The model sets trailing stop losses for its holdings, and once prices fall to those preset levels, the fund liquidates the holdings and moves to cash or other assets that are trending up. It targets retirees and other investors who want to minimize risk.
He credits this conservative approach with helping to limit losses during market downturns.
I buy on the way down. The US is the best market in the world, it will recover. It always does.
The US is the best market in the world, it will recover. It always does.
Still posting this garbage from your blog?
10 YEAR 2.67%
I did that just on dividends while some of my stocks have doubled and tripled.
Not while democrats are in control.
Yes, then topped out in 1966 and all the way downhill until the second half of Reagan’s first term. The US tried to have a war and massive social spending all at once.
https://www.macrotrends.net/1319/dow-jones-100-year-historical-chart
This is the reason players like Black Rock are buying up hard assets like homes, commercial real estate and land. They are liquidating their stock portfolios at the market peak and parking the money in hard assets that will retain a substantial fraction of their value when the market tanks. Others are in liquid assets waiting on the sideline for a market correction. Biden is setting the stage for an epic bout of economic chaos.
“After the 1929 crash, the market recovered - in the 1950’s.”
And it took history’s most destructive war to do it.
Reminds me of the wisdom of John Maynard Keynes: “the market can remain irrational longer than you can remain solvent.”
“Biden is setting the stage for an epic bout of economic chaos.”
The market is like an airplane shudder just before it stalls and spins.
“Yes, then topped out in 1966 and all the way downhill until the second half of Reagan’s first term.”
DJ was fairly flat during that period but inflation ate up the value.
There were several sell-offs from 1966 to 1981.
Think they are going to try anything to keep the party going til after the election. If we have a stock market implosion before November, the Democrats are going to get routed. Lose 100 seats in the house
“They are liquidating their stock portfolios at the market peak “
They were liquidating in 2018.
never heard of this guy.
Worry worry worry
It is contagious
BTW - everyone will die.
Hope you feel better now
I remember when I first started investing in the market. When we had a big drop in the market a lot of my co-workers were selling what they had. I just called my financial advisor and he told to just let it ride. He said that that was the time to buy more stocks. He said the market would come back up and of course it did.
The difference is we are NOW facing a full-on communist police state and not the free-market economy we had previously.
To ignore that reality is utter stupidity.
The real stupidity is thinking you can time the market or read the tea leaves.
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