“If you own 10% equities, as we do, and the market falls 100%, you will lose 10%. That said, you have 90 cents on the dollar to buy equities for free.” – Michael Lebowitz
Let me explain his comment.
Last week, we wrote a piece titled: Risk Limits Hit. When Too Little Is Too Much in which we discussed reducing our equity risk to our lowest levels.
For the last several months, we have been issuing repeated warnings about the market. While such comments are often mistaken for “being bearish,” we have often stated it is our process of managing “risk,” which is most important.
Beginning in mid-January, we began taking profits out of our portfolios and reducing risk. To wit:
‘On Friday, we began the orderly process of reducing exposure in our portfolios to take in profits, reduce portfolio risk, and raise cash levels.’
Importantly, we did not ‘sell everything’ and go to cash.
Since then, we took profits and rebalanced risk again in late January and early February as well.
On Friday/Monday, our ‘limits’ were breached, which required us to sell more.”