Montana-based money manager James Stack is best known for riding out two market bubbles and crashes, and shielding investors from damaging losses.
And after the 2000 technology bubble burst, the portfolio was down just 2.8%, versus a 9.1% drop for the S&P 500. The average newsletter portfolio lost 3.45% in 2000 and in 2008 that loss was 30.15%, according the Hulbert Financial Digest. James Stack: “I think one of the key elements today that increases the uncertainty in the outlook has been the reversal in Fed policy…but it doesn’t necessarily paint a bull market outlook with certainty. We have to keep in mind that the Federal Reserve started easing in 2007 before the recession started, and then subsequently made 12 rate cuts and was virtually powerless in preventing the unwinding, the downward path into recession.
“We’ve also seen a very large, dramatic increase in low-quality corporate debt...that matters because if the economy continues slowing, which it has been for the past six to nine months, then these companies holding this low quality debt will be forced to cut back or retrench. Along with that comes negative economic surprises, reduction in corporate spending, reduction in hiring, increased layoffs and such.
Brett