Given that we are in a period of generalized decline in many investment sectors, we reviewed a broad spectrum of ETFs and CEFs by type in terms of plausible negative outcomes, based on 3-year mean return and 3-yr standard deviation of return.

This “360 View” of plausible negative scenarios analysis looks at:

• Countries & Regions
• US Market-Cap & Style
• US & Global Sectors
• Bonds
• Real Estate
• Commodities & Energy
• Currencies

We calculated these levels of possible negative outcome:

• 3-yr mean return less one standard deviation
• 3-yr mean return less two standard deviations
• 3-yr mean return less three standard deviations

The mean return plus or minus one standard deviation of return theoretically establishes a range for about 68% of probable return outcomes.  Plus or minus two standard deviations establishes a range for about 96% of outcomes.  Three standard deviations on each side of the mean establishes a range for about 99% of probable outcomes.

In extreme circumstances, not experienced in the historical period used to develop the standard deviation, this probability approach goes pretty much out the window.  That is the “fat tail” aspect of statistics.

Whether or not the confluence of adverse resource, economic and geopolitical circumstances we are encountering now puts us in the fat tail area only the future will tell.

NOTE:  This report is not a prediction!  It is an attempt to gauge how bad it could become in the absence of the most extreme circumstances.

The results of our study are available for download by clicking the image of the report below:

Richard Shaw