Out of Whack

A friend in the investment business called on Friday. “I'm not dead yet,” he said, “in fact, I'm feeling better.” (Sorry, that’s a bit of an inside joke – and a reference to medieval Europe – so a bit offbeat, too.)

“I've had a glass of wine – or two. Ruffino Cianti Classico Riserva.
Unfortunately, the bottle was too small.”

“Good wine,” I said.

“Si,”

“Too early here," I observed.

“Ha,” he laughed. “Is there such a thing? It's after lunch, no?”

“So it is,” I agreed. “What’s the celebration?”

“I'm just about finished moving my clients to cash. I have a few who haven't returned calls, but they should be out by mid next week.” “I started moving them in December. I think we are in real trouble here.”

I thought about that, and added, “This is a time when commodities are no refuge either – that looks like a bubble.”

“Agreed. I don't think they are in a bubble, but I think they need a near term correction,” he said. “They are ahead of themselves.”

“When we get a true correction – a bear market – there is nowhere to hide in equities.

“I’ve arranged for healthy lines of credits for my clients For the purpose of investment, "if" we get a large correction But I don't intend to use them, unless we drop 20% or more

“This is the second time in my career that I've felt the markets were out of whack, out of synch... the other was in 1999 into early 2000.

“I have a cartoon from that time on my desk at work. A smiling commentator says, ‘Alan Greenspan noted that the glass was half full... markets rose on the news.’”

“Was the GE news today a wake-up,” I asked?

"Tom, there have been so many wake-ups at this point. I just laugh at the general apathy."

"So, there’s a correction looming?"

"I'd like another month and a half. But if I was confident I had a month and half, my clients wouldn't be in cash already. I'd like more time to call prospective clients, to tell them I'm moving clients to cash, while their broker is pitching the ‘we are long term investors BS.’"

So, there it is. A point of view. A professional point of view. One I’m inclined to take seriously.