The world financial system is increasingly a "house of cards." At any moment, the bull market party may come crashing down with the camel no longer being able to suffer the collective weight of the world's debt problems.
ACTION PLAN
Investors should retain advisors who can adjust their allocations to reflect the increased sovereign risk of certain countries. At the same time, investors and advisors should embrace the decreased risk from investing in high quality, dividend paying companies, many of which are now awash with liquidity.
Portfolios should also be positioned to defend against the potential weakening of certain currencies and use commodity exposure (via Managed Futures) along with dynamic asset allocation as a way to protect against the possibility of inflation and other market risks.
INVESTING LESSON:
Only by standing against the prevailing winds–selectively, but resolutely–can an investor prosper over time. Such a strategy may underperform during markets that are rising based upon the momentum of the herd vs. fundamental valuations.
