We have received numerous requests from old institutional clients that they need help on asset allocation. Even the famous All Weather Bridgewater Fund used by pension funds is under water. The asset allocation modeling that we have done for institutional clients over the years is adopting the most dramatic changes how portfolios should be restructured to survive the 2015-2020 period. We are going to see a lot of banks fall. This will include some of the most famous names that will shock confidence right down to its root core. The currencies will go wild and we are NOT going to even see the standard Flight to Quality rushing to government bonds that dominated the 2007-2011 downturn.
Understanding the core and having the data is the ONLY way to survive what is coming. The traditional models always fail because they lack the historical depth to comprehend how capital truly moves. You cannot rely on data for even just 50 years. That will fail to demonstrate all the possibilities that can unfold. You will certainly never catch how capital responds when the confidence leaves the political wings. Comprehending the core v the peripheral economies is mandatory. If you fail to understand that movement within the global capital flows, you will donate whatever you have to the gods of Wall Street.
This is a chess game that cannot be left to opinion. The standard asset allocation models are determined by human interpolation – nothing more. You can only forecast the future based upon your personal knowledge. What institutional clients relied upon Princeton Economics for was the unbiased computer projections that are consistently rooted in data that required a minimum input of 100 years.
Because what we face is beyond what humans would normally expect given their models are hard-wired with presumptions, we will begin a separate institutional blog for this challenging industry and future. Pictured here is the performance of Long-Term Capital Management and what happened to $1,000 invested. Modeling requires data. To avoid the collapse, the computer must be trained in all scenarios.
We hope to have this by September.