Seaborn Hall, 8/22/2020

 

This installment follows both ‘Global Perfect Storm Portfolio, Part 1, and Global Perfect Storm Portfolio, Part 1 – Short Version.

 

In Part 1, both the complete version and the short, updated version we suggested a beginning medium risk portfolio for a Global ‘Perfect Storm’. This was not meant to be a finished portfolio, but a starter, core version that will depend on various ‘bridges’ to get to a finished ‘Perfect Storm’ portfolio within about 3-5 years – or more.

By ‘bridges’ we mean various, optional portfolio pieces that will either reduce risk and volatility or increase risk and return, depending on the investor’s risk profile and their desire for growth as well as their overall presuppositions and view of the world stage. By ‘building bridges’ we mean the processes of creating these alternative pieces to the existing core portfolio and putting them in place.

A real ‘perfect storm’ of the type predicted by the late John Paul Jackson, and other Christian prophets, creates investment challenges that even the most prepared investor in the U.S. does not normally deal with or anticipate. An essential ‘Perfect Storm’ portfolio, in addition to the above ETF allocations, will have allocations to foreign currency, Cryptocurrencies, and physical gold and silver. It will also anticipate corporate and structural faults that, in a crisis, might affect investment vehicles, banks, brokerages and other institutions. Check back on this page on a monthly basis for updates.

A recommended first ‘bridge’ is foreign currency. As to the foreign currency allocation, we also recommend an allocation of some of the 5% cash to Forex. In hyperinflation, one sign that hyperinflation, or a currency crisis (they are different, see article link below), might occur is a sustained devaluing of the local currency, usually of over 50%, as compared to the major foreign currency used in the nation. In the U.S. it is unclear what this might be at the time that it occurs. One strong possibility is the differential between the U.S. dollar and the euro. The pound and the Swiss franc are two other options. It will probably depend on global conditions and currency movements in that particular time period.

This currency ‘discount’ can occur up to three years before hyperinflation appears – if it appears at all. Having small allocations in foreign currencies available in your brokerage portfolio – or in a separate Forex account – provides an easy place to transfer or place funds in the event a severe crisis develops. We don’t expect this in the U.S. immediately – so this is not an indispensable option currently. On the other hand, the Coronavirus crisis and the increasing amounts of Fed liabilities and increasing deficits from Federal rescue funds has shortened the time frame that the US might reach ‘critical’ condition.

In our portfolio we are keeping three small foreign currency positions: The Euro, the UK pound, and the Canadian Dollar. At some point, we may switch out one of these for the Swiss Franc.

A recommended second ‘bridge’ is adding to and diversifying alternative and commodity investment allocations. Add IZRL, Israeli ETF, by ARK Management. Alternative category.

In our own portfolio we’ve added commodity and alternative diversifiers: IZRL, DBC, and NFRA. These are in addition to GSG, a commodity ETF, and IGF, an infrastructure ETF.

As of Saturday, August 22, we only have losses in 3 positions (other than in currency): IGF, XLE (which is a long term position and one in which we started the crisis with a significant loss), and  VNQ, our real estate ETF. We would expect real estate to lag the recovery of the crisis some, then catch up over the next few years.

Our gain from early in the crisis, around mid-March, to present is over 20%. This is considered a moderately conservative, diversified portfolio so these gains are more than ample for our goals.

 

Global Perfect Storm Portfolio – 2

Global Perfect Storm Portfolio – 1

 

 

Related Links

 

How Likely Is Hyperinflation In the U.S.?

Building The Global ‘Perfect Storm’ Portfolio, Complete Version, Common Sense Money

The Bernie Madoff Fraud: Five Lessons For Investors From The ‘Wizard Of Lies, Advisor Perspectives

I Wrote A Popular Piece On ‘Lessons From The Madoff Fraud,’ Then I Got Scammed — Here’s Why, Medium

How Likely Is Hyperinflation In The US?, Zero Hedge

Building The Global ‘Perfect Storm’ Portfolio, part 1