The Allocator's Lament

What does an asset allocator do when there’s not a single asset class that looks attractive?  This is a question that is currently nagging virtually every investment management pro I know.

The obvious answer to this question is cash – as unsatisfying as that may be.

In his excellent white paper “The Seven Immutable Laws of Investing“, James Montier tackles it in his own inimitable style.  The below  seven year forward forecast for asset classes is the source of Montier’s lack of enthusiasm…

Looking at the inherent potential rewards based on GMO‘s forecast you see above, Montier says the following

This dearth of assets offering a margin of safety raises a conundrum for the asset allocation professional: what does
one do in a world where nothing is cheap? Personally, I’d seek to raise cash. This is obvious not for its thoroughly
uninspiring near-zero yield, but because it acts as dry powder – a store of value to deploy when the opportunity set
offered by Mr. Market once again becomes more appealing. And this is likely, as long as the emotional pendulum
of investors oscillates between the depths of despair and irrational exuberance as it always has done. Of course, the
timing of these swings remains as nebulous as ever.

If you haven’t yet read his entire paper, I highly recommend you get over there to do so today.  You’ll have to register with GMO, but you should anyway.

Source:

GMO Research and Commentary

What's been said:

Discussions found on the web
  1. w88 commented on Sep 20

    … [Trackback]

    […] Find More on that Topic: thereformedbroker.com/2011/03/09/the-allocators-lament/ […]

  2. 먹튀검증 commented on Nov 07

    … [Trackback]

    […] There you will find 30174 additional Info on that Topic: thereformedbroker.com/2011/03/09/the-allocators-lament/ […]

  3. rbc online commented on Nov 17

    … [Trackback]

    […] Info to that Topic: thereformedbroker.com/2011/03/09/the-allocators-lament/ […]

  4. Bildemontering Uddevalla commented on Nov 19

    … [Trackback]

    […] Read More on that Topic: thereformedbroker.com/2011/03/09/the-allocators-lament/ […]

  5. security as code commented on Dec 01

    … [Trackback]

    […] There you can find 56076 more Info to that Topic: thereformedbroker.com/2011/03/09/the-allocators-lament/ […]

  6. 토토사이트 commented on Dec 14

    … [Trackback]

    […] Read More to that Topic: thereformedbroker.com/2011/03/09/the-allocators-lament/ […]

  7. 파워볼사이트 commented on Dec 28

    … [Trackback]

    […] Info on that Topic: thereformedbroker.com/2011/03/09/the-allocators-lament/ […]

  8. click me commented on Jan 03

    … [Trackback]

    […] Find More to that Topic: thereformedbroker.com/2011/03/09/the-allocators-lament/ […]