Kotok: Be Nimble At Markets' Turning Point

February 07, 2017

If we have a major inflection point, and we don’t know the direction of change and the velocity of the change, what do we do? That is the context in 2017 that everybody else as market agents has to deal with managing portfolios, stocks and bonds, asset classes.

ETF.com: So are you buying a lot of Maalox now?

Kotok: I ran out!

I think you have to be nimble. I think tactical decisions as opposed to buy/hold are more important than ever. And if one wants to buy/hold and not make tactical decisions, you can do that at very low cost.

ETF.com: With so many question marks in the current scenario, are you taking on additional risk by not being tactical?

Kotok: Well, I think so, but there are people who would disagree. That's what makes markets. In my view, cash is an asset class now. It has a legitimate place even though the interest rate is near zero. And one has to view the world in this context of a dramatic inflection point without a direction known.

The turning of the inflection point will happen before you can confirm the trend. And that means you have to do some guesswork, do some estimation, and be prepared to be wrong and change your mind quickly.

ETF.com: How do you recover if you guess wrong?

Kotok: Take small losses, take them fast. Admit you don't know everything.

ETF.com: And regroup?

Kotok: Well, if you want to stay in the game. Otherwise, go fishing and stop being in the business.

 

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