Your concern around tightening credit conditions is one I share. In sympathy with @madamswer's comments, I too am not willing to actually make a big bet ("big" relative to my overall portfolio) to attempt to profit from macro forecasts, as I believe precise forecasts about the future are beyond me.
That said, I do believe in positioning one's portfolio to mitigate risk, or to maximise (to a degree) portfolio robustness. As such I have reduced my exposure (which was overly exposed in this sense) to a number of stocks that I feel are vulnerable to tightening credit conditions (and all that entails for a stretched domestic economy).
I'm actually not a fan, in the main, of this sort of thing (rebalancing to suit macro concerns), for most people (including myself). However, as I felt that my portfolio was very concentrated and too exposed to certain stocks/sectors, I saw my moves as risk mitigation, rather than shrewd forecasting. In other words, my portfolio probably shouldn't have been positioned thus to start with. Or perhaps that's just how I justified it to myself - ha ha.
So why am I not usually a fan of trying to anticipate big scary macro themes? The thing is that markets are discounting machines. They are very effective at pricing-in fears/expectations held by market participants. If I have a fear, then I think I have to ask myself, am I so unique that I'm one of the very few market participant holding that fear? Or am I fairly typical, and thus are most other participants almost certain to also hold the same concern?
So I think for 99.9% of us, we would have to have as a default position that the concerns are already priced in. This especially when the concerns have been heavily splashed all over the mainstream media.
I don't know the answer. It's a dilemma for me. How do you think about it?
DLX Price at posting:
$6.58 Sentiment: None Disclosure: Not Held
