During his recent interview with Delivering Alpha, Ken Griffin explained why you don’t want to own so many equities that you’re forced to sell at the bottom. Here’s an excerpt from the interview:
SCOTT WAPNER: Stan [Druckenmiller], you know, aside from suggesting that there was going to be a hard landing at some point next year, suggested you could have something much worse than that. Do you think we could?
KEN GRIFFIN: I mean, it’s possible. It’s always — here is the problem with economics.
I spent three years of my life pulling my hair out at Harvard studying economics. There is no answer. There’s just distributions. There’s just what may happen.
And of course there’s some distribution that says we’re going to go into a significant recession or depression. I can give you that story. I can give you that really bearish story. I’m not sure it serves much purpose.
One should always think about that in terms of their portfolio allocation. Can I endure the losses in my portfolio that would go with a severe recession or depression?
I should be aware of that possibility. But you want to think about managing your portfolio over your life and over your ability to sustain your risk positions over the journey of your life.
In other words, you don’t want to own so many equities that when the inevitable recession happens, you’re forced to sell at the bottom.
That’s a much more important concept for investors to understand and to focus on than trying to prognosticate as to when the next recession is going to happen, if that makes any sense.
You can watch the entire discussion here:
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