Valuable reminder from Carter in this clip: “96% of money managers are long always.”
This means they stay fully invested in stocks throughout bear markets. This means, regardless of how crazy and dangerous valuations become; regardless of the fact that cyclical declines tend to evaporate more than 40%+ of invested capital during secular bear markets; regardless of a client’s age and stage; regardless of whether clients are approaching or already in retirement; regardless of whether clients are dependent on the capital for income. Regardless of every rational and mathematical fact that confirms avoiding capital losses must be the primary investment objective, 96% of money managers keep their client capital in risk assets as markets enter cyclical declines.
They do this because they chose to put their own best interests of maximizing fee flow ahead of the best interests of their clients. In the end, it’s that simple.
Is it time to hit the sell button? Carter Worth of Cornerstone Macro analyzes extreme defensive behavior in the market. Here is a direct video link.
Long always managers ‘re-position’ to dividend paying stocks like utilities in an effort–not to avoid losses–to lose less. This is like moving chairs on a sinking ship. Dividend paying stocks, do not dec0uple in bear markets. The last two bear markets (2000-02, and 2007-09), dividend paying stocks fell more than 40%, while the broad markets fell 55%. Defensive for whom?