Show me someone using the term “unprecedented” with regards to market situation and I’ll show you a person with either little market experience, or no clue, or both. The evolution of market dynamics is a continuous series of unprecedented events and anyone not realizing, or accepting this fact is doing a disservice to herself and her clients.
So, the question boils down to how going about navigating a series of unprecedented events with any chance of success; It all about having a Strategy which prescribes actions so thoroughly that you never have to make a decision in following it in the first place. From this arises the second necessary condition for decision making under (constant) uncertainty, which is Discipline in following the laid-out strategy.
Current discussion about market evolution assigns almost a 50-50 chance on either direction. Making a directional bet based on some form of “analysis” is akin to a coin toss, given all the extraneous parameters over which no-one has a grasp on.
Luckily, at Whitetip Investments AEPEY we’re as stress-free as ever. Our course of action is dictated by TASIS, our proprietary, in-house developed investment management system that rewards assets for trend and penalizes them for volatility and with its robust risk management overlay provides an integrated approach throughout the entire investment cycle. Thanks to TASIS, our portfolios were quiet passive throughout last summer to early fall, went outright long late October, but started trimming positions by the end of February. By the end of the first week of March they were almost completely liquidated and by the next they were outright short. All this happened naturally, just by following the flow of our system’s dictates.
So how do our portfolios look currently? As said, it’s a 50-50 outlook so they’re positioned accordingly with an almost equal split among long & short positions. The global economy is at a junction point in which some industries will pan out as winners and some as losers. A long-short approach is a natural choice in such a situation. Do we expect (or even demand) that every position is going to be a winner? Certainly not. But, instead of promoting convictions based on a self-induced dogma, we let price action be the final jury, which in the process forces us to follow the simple (to the point of truism), but yet so powerful maxim: Cut the losses short and let the profits run, till the trend becomes your friend…
Happy investing everyone!
Dimitrios NOUSIAS, CFA
Whitetip Investments AEPEY