Always also bet on a loosing strategy

Fundamental to our way of investing is to apply several strategies - in the shape of asset allocation - at the same time.

It feels good to see a strategy be on the winning side. 20-40 percent up in a year as stocks are now, when a credit crunch seems like a forgotten phenomena domesticated by seemingly sage monetary policy. It's all sweet for the ego. We can look ourselves in the mirror - and look on the black numbers on our accounts - and pat ourselves on the shoulders and admire how smart we are.

That's the easy part.

The hard thing in our case is that we are much more paranoid. And being paranoid seems to often involve to  also always bet on a loosing strategy.

There's at least one strategy that we have in our portfolio that needs to be on the correspondingly very much losing side.

Not just a little on the losing side, but on the lunatic kind of loosing side that no-one writes anything positive about, except predictions of ruin and how imbecile one has to be too have even a penny in that corner, not to mention one's mental prospects if one actively pours money in that direction.

At the time of writing, that might be dollar-denominated long term (25y+) treasury bonds. Only a fool would buy, the saying goes.

He had it going, but in the end even his horse abandoned Marcus Antonius

CC-3.0 Pierre Selim

Not only that, we need to buy into the losing strategy, and see that money disappear in a market that has lost faith in whatever asset it is.

The losses are offset by the winning asset, in most cases (but not always). 

In order to get protection, one can't only win. One always also need to accumulate losses.

Because when the pendulum swings, everything catches fire and everyone is running to the doors, there will be no time to buy into that contrarian asset. 

The only sane thing to do is to already stand with a substantial part of one's wealth in the corner that most investors thought was wrong.

The final conclusion would perhaps be: additionally to winning, make sure that you're also always loosing money.

Farewell.

/antinous&lucilius

Were to go from here?

Try: A well kept secret: our portfolio for accumulation