Cold War Redux Calls for Old-School Investing—Searching for Alpha for March 2014

Tensions in the Ukraine harken back to the dark days of U.S.-Russia relations, when Soviet tanks poured into Czechoslovakia in 1968. What we learned about portfolio construction then is a good guide for RIAs getting flows of fresh cash that need to be put to work.

For starters, stick close to home. Any destabilization in Crimea will likely affect foreign bourses to a greater degree. Domestic stocks may be at all-time highs, but so are profits, and we don’t face the threat of political instability that has become the hallmark of Eastern European relations. 

Long bonds have been a great source of diversification this quarter, and should be considered a good hedge against falling stock prices. 

I’m not a fan of extending duration for more than necessary, even though the contrarians seems to be digging in their heels for the long haul. But if things get back to normal overseas, I would expect the Fed to give a dovish nod to the markets.

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