As 2011 passed, very few would disagree, that it was a hard year for investors. Relative strength strategies were hit really hard after the market peak in Q2, as you can see from my peers' performance. S&P500 practically unchanged and with wild swings throughout the year has not really justified to be in the stock market. Events in Japan and Europe have added to the great volatility and reminded us of 2008. Guru investors like Bill Gross, John Paulson, Bruce Berkowitz, to name a few, can tell you more how difficult the year was for them.
Even so, the Marathon Investor could not have asked for a better year to start this journey with you. A bit in the black for the 8 months since inception, I may say the way to protect one's capital and position portfolio for growth has been demonstrated and I hope this monthly publication helps in your investment decisions.
2012 does not look like to be much less challenging for investors. European recession has been added to the debt crisis, huge Japanese debt, Chinese threat of hard landing, the U.S. recession not completely ruled out, elevated geopolitical changes with o lot of countries facing leadership changes, Iran/Middle East issues – this is a lineup of major risks being watched and reflected by the markets, and they are not going to disappear soon. An average investor can hide in safe assets like high quality U.S. bonds and defensive stocks (as he is, and perhaps should be doing). Having a system and a disciplined approach to investments is key to navigate these markets. Marathon Investor offers a primer on adaptive asset allocation without spending much time on analyzing the challenges of the world economy. Risk management, long-term asset class valuation and relative strength are the inputs to MI decision framework. It does not abandon the concept of strategic asset allocation (which many confuse with static!) and market efficiency, which gives a natural bias to the market (lazy) portfolio in a normal environment. MI is not seeing such however. Massive deleveraging and markets' distortion by the central banks and the governments present a different and a rare environment, so pure lazyness is not justified yet. Thanks for staying with me, and good luck in 2012!