Defensive Posture

Ooh a storm is threatening our very lives today
If I don't get some shelter, oh I'm gonna fade away
--Rolling Stones

The last couple of weeks has found me selling strength in pursuit of a more defensive posture. Current asset allocation is:

stocks  18%
fixed income  4%
alternative assets  18%
cash  60%

Alternative assets are composed of 8% commodities and 10% short equity. Because my fixed income is in short duration insured instruments (i.e., 'risk free'), then I estimate my net risk or net market exposure at about 16% (18% stocks + 8% commodities - 10% short equity).

Am increasingly watching the Greece/EU situation with a certain sense of deja vu toward 2007. Massive debt, intertwined banks, and unknown but likely large derivatives exposure. While some markets have been flashing warning signals (e.g., 10 yr Treasury yields, swiss franc), most markets have been trading in a benign state of denial.

From where I sit, probability of a deflationary downdraft is increasing, and the time horizon is dead ahead.

As such, I would like to reduce my net market exposure even more. I might do this by selling strength should stock/equity markets rally further, or by increasing my short position.