Jeff Saut on Risk Management & Admitting When You're Wrong ~ market folly

Monday, April 30, 2012

Jeff Saut on Risk Management & Admitting When You're Wrong

Market strategist Jeff Saut's weekly commentary this time around is entitled, "Truth of Consequences?" and in it he compiles a compendium of quotes on risk management.

He points out that Benjamin Graham wrote, "The essence of investment management is the management of risks, not the management of returns."

He also singles out a quotation by Peter Bernstein, who said, "The trick is not to be the hottest stock-picker, the winning forecaster, or the developer of the neatest model; such victories are transient.  The trick is to survive.  Performing that trick requires a strong stomach for being wrong, because we are all going to be wrong more often than we expect."

Saut elaborates on this point by arguing it's what you do when you're wrong that can easily influence returns.  We'd also point to our post with Michael Karsch's thoughts on risk management.

Applying these thoughts to the current market, Saut is still waiting for a more buyable pullback and has been playing things conservatively by recommending equities with solid yields such as Rayonier (RYN) and LINN Energy (LINE). 

So he admits to being 'wrong' by being cautious as of late, but he highlights a myriad of technical signals in his latest market commentary as the rationale for his positioning:

You can download a .pdf copy here.

Be sure to also check out his past commentary on how currency dilution is fueling asset rallies.

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