It is one thing to claim that stocks are risky and overvalued, but quite another to avoid stocks entirely.
Roger Pine, a financial adviser at Briaud Financial Advisors Inc., makes no apologies for being underweight equities since 1999 and out of stocks entirely for the past year.
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That the S&P 500 has gained more than 120% in the past four years is irrelevant to him because he is determined to protect against investment losses.
“In our view, stocks are not the place to buy and hold,” Mr. Pine said. “It is important to miss the down years in the market so you don't have a deep hole to dig yourself out of.”
Briaud, which has $485 million under advisement, manages client assets simply to beat inflation by at least 2 percentage points.
To that end, its model portfolio includes 25% U.S. Treasury bonds, 20% tax-free bonds, 20% cash, 20% cash flow alternatives, 10% gold and 5% in the PowerShares DB U.S. Dollar Index ETF (UUP).
The exchange-traded-fund proxy for the dollar allocation is a bet on a flight to quality, and the cash flow alternatives include an allocation to master limited partnerships that leverage the fast-growing sector of domestic oil and gas exploration and production.
“With our top-down view, we operate almost like a global macro hedge fund,” Mr. Pine said. “Our view is that we're in the midst of a long-run secular bear market, and in the third or fourth chapter of a global deleveraging story.”
Even the low of March 2009 wasn't enough to tempt Mr. Pine to jump on the equity bandwagon.
Mr. Pine acknowledged that he hardly has participated in the roaring stock market rally that has unfolded since then, but his clients also haven't shared in the market's rising risk levels.
“Even in secular bear markets, you will have more up years than down years, but the problem is, the down years are enormous,” he said. “We'll know when this secular bear market is over because it will get so bad that people will start saying things like, "You're never going to make money in equities again.'”
The secular bear market started after the technology bubble burst in 2000, and it could last another three to five years, Mr. Pine said.
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