Strategy Change in ETF Accounts
January 28, 2011
We have a strategy change.
We have raised cash in US stock accounts, international stock accounts and global multi-asset class accounts. This is the first time we have done so since becoming fully invested in early 2009. Our selling strategy emphasized exiting small cap positions.
We are worried about the developing geopolitical risk in the Middle East and North Africa. We do not know where it will spread nor do we know how it will run its course. We also do not know what direction these regimes will take if there is over throw of the existing system in any of these countries. We do know that we see turmoil in Egypt, Tunisia and Yemen.
As everyone can see by following the news flow, this is not confined to any single country. Therefore, a contagion risk exists. The risk is that it spreads elsewhere in the Arab world. Modern technology allows turmoil to be exported quickly from place to place. We are seeing it daily.
We do not know how long we will stay positioned with a cash reserve. Moreover, we may redeploy quickly or slowly. For now, we go into the weekend with the highest cash reserve since the 2008, post-Lehman-AIG period.
David R. Kotok, Chairman and Chief Investment Officer