Timing of recent moves to trim the portfolio Beta down to ~0.0x was fortuitous insofar as the market moved downward almost immediately thereafter. The model is now up ~15% since inception vs. ~0% for the benchmark Vanguard Total World Stock fund (ticker: VT).
Essentially, the portfolio is now 66% long of low beta stocks diversified across economic sectors and national geographies, except for my own esoteric bias against banks and gold miners, and 33% short of the S&P 500 (i.e. Large-cap, U.S. stocks).
Since I think the economy has reached an intermediate term headwind, I don't expect to go net long again anytime this year. The market will probably have a few huge up days here and there as the Fed makes announcements concerning liquidity supports, but overall I think the downside risk is too much for being long anytime soon. I wish I saw it differently, and was correct in seeing it that way, but that's not the case and only time will tell. It's frightening to see the recent flight to treasuries and away from stocks and high-yield bonds; reminds me of darker days. At the least, it doesn't portend good things for folks seeking work. If only this were to prove true, the import-substitution effect and associated multiplier would be a huge game changer and brighten the future of profits and jobs (ht: andrew).
