Liquid Alternatives: Before The Bubble Bursts, Take Shelter In Value And Liquid Alts (GMO’s Inker)
Ben Inker, GMO’s head of asset allocation, has a doomsayer reputation.
A retail investor called up Inker in the middle of the night to berate him for his view that retail investors would be hit hardest when the market collapses. Writing on the incident in his Q1 2021 letter, Inker said investors, particularly newbies, should shift away from speculative growth stocks to value or liquid alternatives. (CityWireSelector)
Inker is worried by the unbridled speculation that is driving markets. This kind of market always ends badly for retail investors.
“The explosion in the use of derivatives that are purely speculative in nature shows a stark change in the motivations of a significant fraction of market participants,” Inker wrote. “It is almost unquestionable that speculation is a much bigger driver in the stock market today than is normally the case.”
Other factors to note are the record numbers of issuances and the proliferation of SPACs. The latter, according to Inker, is another route that investors are taking towards speculation.
These factors could ultimately lead the bubble to burst, “sooner rather than later.”
“If the bubble bursting takes the form of the speculative end of growth falling, the easy protection is not to own the speculative end of growth,” is Inker’s common-sense advice to investors.
Instead, go for value or liquid alternatives
Investors could otherwise shield their portfolios by “choosing to bias them toward value and away from the most expensive end of growth.”
Another way to reduce risk and enhance return is to invest in liquid alternatives, suggested Inker.
Inker’s Equity Dislocation Strategy shorts the high-end speculative growth stocks and is long on financials and consumer discretionary stocks.
Latest Alternative Investment News
Venture Capital/ESG: Brookfield Raises Mammoth $15B Fund Focused On The Climate Transition To Net Zero
Brookfield Asset Management (NYSE: BAM) announced the final close of its $15 billion Brookfield Global Transition Fund, receiving investments from institutions and private wealth channels including public and private pension…
Digital challenger bank Revolut has commenced the rollout of a BNPL offering in Ireland this week. It will compete with established BNPL players in the country such as Swedish fintech…
Crypto asset manager Osprey Funds has launched the the Osprey Solana Trust (OSOL). The firm said earlier this month that the fund has commenced trading via the OTCQB market. OSOL…
In a move to incorporate AI into the somewhat tedious and error-prone manual vehicle inspections, GM (NYSE: GM) has taken a stake in UVeye, an Israeli startup creating vehicle inspection…