Jim McTague devotes his latest “D.C. Current” column in Barron’s to expert advice about the likely impact for investors of upcoming political events.
Oh my! Look what’s on your fall calendar: American involvement in another Middle Eastern war and yet another bitter clash on Capitol Hill over the debt ceiling.
We’ve been warned about this over and over, and we all remember how similar events caused wild swings in the markets in 2011. Yet based on my e-mails, some of you are groping for a survival strategy. So here’s sage advice from a trio of experts: Take some profits now to build up cash; consider playing the currency markets and, if you are both savvy and flush with cash, the commodities markets; and wait patiently for the right opportunity to pounce again on equities, even if it takes months.
I touched base with three pros. …
… [Mark] SPITZNAGEL, A MATHEMATICIAN and the author of the Dao of Capital: Austrian Investing in a Distorted World, is one of the great contrarian investors to emerge from the 2008 market crash. He also shorted the markets just before the Flash Crash in May 2010, yet another move that paid off brilliantly. Since then, he has been betting that the stock market, which has been pumped up by the Federal Reserve’s easy-money policies, will fall 40% or more when the stimulus is removed. He expects that to happen in a year or so.
As for the impact on the markets of a war with Syria and a debt- ceiling clash — Spitznagel says he doesn’t focus on any particular catalyst, just on the market’s overall structural weakness. Spitznagel’s firm hedges with derivatives and other exotic investments. His advice for retail investors is simply: “Move into cash, as painful as that might be” and “focus on opportunities that lie ahead, rather than focusing on the opportunities du jour, like dividend-paying stocks.”
