{"id":19652,"date":"2022-04-22T07:30:39","date_gmt":"2022-04-22T11:30:39","guid":{"rendered":"https:\/\/www.jeffclarktrader.com\/?p=19652"},"modified":"2022-04-22T07:30:39","modified_gmt":"2022-04-22T11:30:39","slug":"beware-of-the-trillion-dollar-cookie-cutter-strategy","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/beware-of-the-trillion-dollar-cookie-cutter-strategy\/","title":{"rendered":"Beware of the Trillion-Dollar Cookie Cutter Strategy"},"content":{"rendered":"

On Tuesday<\/a>, I called the multi-generational breakout in interest rates a trend changer…<\/p>\n

And a regime shift that is exposing just how unprepared the global financial system is.<\/p>\n

That’s because a weak stock market – coupled with rising rates – clashes with the traditional 60\/40 portfolio.<\/p>\n

It’s a trillion-dollar, cookie cutter model that’s used by most traditional money managers.<\/p>\n

As I suspected, many of you are worried about this outdated model…<\/p>\n

Richard, a member of Jeff Clark Trader<\/em>, wrote:<\/p>\n

\n

I have a traditional 60\/40 equities to bonds split in my portfolio, through a traditional broker. I would like to move all bonds over to gold and silver… Those bonds killed me during this first quarter. I am, after a little more study of your materials, going to trade options.<\/p>\n

– Richard S.<\/strong><\/p>\n<\/blockquote>\n

Thanks for sharing, Richard.<\/p>\n

His thought process is correct. Adding gold to stocks and<\/em> having an active trading component to your portfolio is exactly what’s needed.<\/p>\n

But first, it’s important to understand why money managers have fallen in love with pairing stocks and bonds.<\/p>\n

Historical data pushes the belief that stocks and bonds always<\/em> rise in an inverse manner.<\/p>\n

Meaning, when one rises the other tends to fall. But overall, both rise together.<\/p>\n

This expectation is what everyone’s after. It’s the holy grail of investment management.<\/p>\n

Investors believe that if you pair enough uncorrelated products together with a positive return expectancy – you can smooth out your returns over time.<\/p>\n

Under this belief, bonds would perform well when the market turns weak. But this old investment model doesn’t apply to today’s economy.<\/p>\n

When regimes shift, as they are now, historical data becomes a mere mirage.<\/p>\n

Right now, both stocks and bonds are falling in unison.<\/p>\n

But gold is not.<\/p>\n

It’s continuing to display its true value, as one of the best, time-tested products that rise in a truly <\/em>inverse way with the stock market.<\/p>\n

I’ve always wondered why firms like BlackRock or JPMorgan Chase never encouraged a 5%-10% allocation in gold. Instead, they came up with cockamamie products like “smart beta” exchange-traded funds<\/a> (ETF), to combat market drawdowns and help portfolios.<\/p>\n

But these ETFs never <\/em>rise when investors need them most. They fall in unison.<\/p>\n

They do this because the more products these firms create, the more fees they collect by implementing them into portfolios.<\/p>\n

Gold does the job, but it doesn’t add to their <\/em>bottom line – even though it’s the perfect long-term addition to your portfolio.<\/p>\n\n\n\n
\n

Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just click here<\/a> to check it out.<\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Which brings me to Richard’s second part of his question – the active trading component.<\/p>\n

BlackRock recently came out with a thought piece titled “Rebalancing the Lopsided 60\/40 Portfolio.”<\/p>\n

Based on the title, I thought for <\/em>sure they would include something about gold.<\/p>\n

I was wrong.<\/p>\n

To Richard’s credit, they acknowledged that passive portfolio management is probably dead for now… And that active trading is where it’s at by introducing something called long\/short investing (combining a long portfolio with short positions).<\/p>\n

The problem is that it relies on their ability to pick stock losers and<\/em> winners at the same time.<\/p>\n

And at some point, the bull<\/a> market will return. And when it does, this strategy will become subpar.<\/p>\n

Hedge funds and professional traders do this well… not passive money managers.<\/p>\n

My other thought is always, “Where were you when the market was at its peak?”<\/p>\n

Firms like this are the same ones that cheerlead an obviously overvalued market and change their tune when its advantageous to do so.<\/p>\n

With an active trading service like ours, we call ‘em like we see ‘em.<\/p>\n

Which is why as the market was at all-time highs, we came out with several pieces calling for a swift about-face in stock prices, specifically tech.<\/p>\n

Jeff Clark talks about it here<\/a>, and I also mention it here.<\/a><\/p>\n

Hopefully this helps Richard and the rest of our readers.<\/p>\n

Regards,<\/p>\n

Eric Shamilov
Analyst, Market Minute<\/em><\/p>\n

<\/p>\n

Reader Mailbag<\/h2>\n

How will you be restructuring your portfolio in this bear market?<\/p>\n

Let us know your thoughts – and any questions you have – at feedback@jeffclarktrader.com<\/a>.<\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

This may worry some people…<\/p>\n","protected":false},"author":49,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[13],"newsletter-type":[],"ticker":[],"class_list":["post-19652","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-eric-shamilov"],"acf":[],"ai_tts_audio_outdated":false,"ai_tts_legacy_post":false,"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19652","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/49"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=19652"}],"version-history":[{"count":0,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/19652\/revisions"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=19652"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=19652"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=19652"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=19652"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=19652"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=19652"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=19652"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}