‘Change comes slowly then all at once’

The Australian sharemarket lost around $60bn in the first week of October, which is historically a challenging month for investors, but in his latest Livewire polemic, Portfolio Manager Dr Jerome Lander argues investors should start preparing themselves for a recession “we have to have.”

Dr Lander asserts central bank stimulus has created an “Everything Bubble” built on easy money, making mainstream asset prices fictitiously large relative to the size of the economy and incomes.

Inevitably current economic, political and financial challenges will require markets to come to grips with reality.

Investors can act to protect themselves from large market falls and reduce market risk without resorting to cash alone. They can position their portfolios diversely to protect their capital in adverse market conditions and yet still achieve a prospective return, without suffering no effective return in cash should market prices remain highly elevated.

How can this be achieved?

Jerome explains:

“One can benefit from both capital preservation and more prospective returns than cash through investing dynamically, selectively, and skilfully in absolute return managers whose return streams are not market dependent. Simply put, if the market is ripe for a fall or years of low returns, simply avoid and minimise this risk by investing in unrelated skill-based returns which offer many of the benefits of cash, but with much better return prospects than cash. In this way, investors can win either way – they can make money if markets continue to defy gravity, yet they can also protect capital and still be relatively well positioned should markets collapse.”

A full version of this article appeared in Livewire on 3 October.

If you have any questions please email the team at privatewealth@lucernepartners.com or call +61 3 8560 1440.

 

 

 

 

 

 

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