New Harbor: A Time For Staying Out Of Harms Way
Given the brutal start to the markets in the first three weeks of 2016, we thought it a good time to check in with the team at New Harbor Financial. We have had them on our podcast periodically over the past years as the market churned to ever new highs, and have always appreciated their skepticism of these liquidity-driven “”markets”” as well as their unwavering commitment to risk management should the party in stocks end suddenly.
So, how is their risk-managed approach faring now that the S&P 500 has suddenly dropped 8% since Christmas? Quite well. Their general portfolio is flat for the year so far — evidence that caution, prudence and hedging can indeed preserve capital during market downdrafts.
We’ve invited the New Harbor team back on this week to hear their latest assessment on the markets, as well as how they’re approaching their portfolio positioning moving forward:
We spend a lot of time talking about position sizing. Right now we have very little in the stock market. We never cheer for a crash in the sense that we know a lot of people would likely get harmed in such a scenario, but we also spend our time assessing reality and probability. The likelihood of probability for a crash certainly has never been non-zero, but it has developed a greater likelihood than it had even just a few weeks ago. There has been a notable sentiment change.
I’d like to point out: we’re not even a month into the year and we have already clawed back over two years’ worth of gains in the stock market. Even if you look at the S&P 500, which has been the most lofty because of its capitalization-weighted nature, where we are at right now takes us all the way back near the end of 2013.
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