Citi Says Wealthy Clients Are Holding Too Much Cash, Time to Buy

[Nighthawk]

Wealthy clients of Citigroup Inc.’s private bank hold way too much cash, according to chief investment officer David Bailin, and he and his colleagues have big plans to help put an end to that.

The private bank’s mid-year outlook, “From Fear to Prosperity: Investing in a New Economic Cycle,” released Thursday, recommends major changes to portfolios to reflect what Bailin called “the complexities and new realities of our time.”

“There are plenty of things to buy,” Bailin said in a phone interview. “The more study that we did for the report, the more excited we got. The data is compelling.”

The report’s big-picture outlook is for a “brief, extremely deep, rolling global recession” followed by a sharp snapback in global economic activity and “a partial, uneven recovery.”

https://www.bloomberg.com/news/arti...lding-too-much-cash-time-to-buy?sref=8VvBkCcD

 

[ET180]

Wealthy clients of Citigroup Inc.’s private bank hold way too much cash, according to chief investment officer David Bailin, and he and his colleagues have big plans to help put an end to that.

The private bank’s mid-year outlook, “From Fear to Prosperity: Investing in a New Economic Cycle,” released Thursday, recommends major changes to portfolios to reflect what Bailin called “the complexities and new realities of our time.”

I don't think we're in a new economic cycle. Bear markets usually end with fear, very low P/Es, and no one wanting to buy stocks. They also end with bankruptcies, defaults, layoffs, and higher unemployment which is painful, but necessary for restructuring / capital-reallocation and higher long-term growth -- creative destruction. That's not what we experienced over the past few months. So I think we're effectively still late cycle of an 11 year bull market. Some stocks have a good reward : risk ratio, but overall the indexes are higher (QQQ) or near (SPY) where they were at the beginning of the year when markets were expecting upper single digit earnings growth for 2020. We now know that won't happen, but yet pricing has not changed. 150% market cap to GDP. Still 13% (or higher) unemployment...I still see a lot of risks and I'm assuming that C19 is over. It's all been Fed and government money-printing driven.

 

[ironchef]

I don't think we're in a new economic cycle. Bear markets usually end with fear, very low P/Es, and no one wanting to buy stocks. They also end with bankruptcies, defaults, layoffs, and higher unemployment which is painful, but necessary for restructuring / capital-reallocation and higher long-term growth -- creative destruction. That's not what we experienced over the past few months.

Didn't you just describe what happened in March and April? Fear was everywhere, even here on ET, on March 23rd, when the DOW was down almost 40% from February's high. bankruptcies, defaults layoffs and 25% unemployment....

 

[ironchef]

Wealthy clients of Citigroup Inc.’s private bank hold way too much cash, according to chief investment officer David Bailin, and he and his colleagues have big plans to help put an end to that.

The private bank’s mid-year outlook, “From Fear to Prosperity: Investing in a New Economic Cycle,” released Thursday, recommends major changes to portfolios to reflect what Bailin called “the complexities and new realities of our time.”

“There are plenty of things to buy,” Bailin said in a phone interview. “The more study that we did for the report, the more excited we got. The data is compelling.”

The report’s big-picture outlook is for a “brief, extremely deep, rolling global recession” followed by a sharp snapback in global economic activity and “a partial, uneven recovery.”

https://www.bloomberg.com/news/arti...lding-too-much-cash-time-to-buy?sref=8VvBkCcD

Where was David Bailin back in March? He should tell them to buy then, not now when stocks are reaching ATH again.

Sounds like the wealthy are just like us plebeians: Buy high sell low, give the pro boys a chance to get out.

 

[ET180]

Didn't you just describe what happened in March and April? Fear was everywhere, even here on ET, on March 23rd, when the DOW was down almost 40% from February's high. bankruptcies, defaults layoffs and 25% unemployment....

Yes, there definitely was fear then but for a very short amount of time. The fear did not last long enough to have a lasting effect on investor psychology. If it did, QQQ would not have made new all time highs last Friday. The fact that we recovered so fast means that we effectively experienced a deep correction rather than a bear market despite the event meeting the technical definition for a bear market defined by 20% drop.

 

[ironchef]

Yes, there definitely was fear then but for a very short amount of time. The fear did not last long enough to have a lasting effect on investor psychology. If it did, QQQ would not have made new all time highs last Friday. The fact that we recovered so fast means that we effectively experienced a deep correction rather than a bear market despite the event meeting the technical definition for a bear market defined by 20% drop.

I agree with you actually. To me this covid-19 situation is not an economic recession but more a natural disaster, like a Category 5+++ hurricane.

If history is any guide, after a natural disaster the economy rebounded very quickly because there were lots of rebuilt activity.