This paragraph, written by James, may be applicable to the situation in the markets these days, if one believes that equities may lead over credit for a longer time:
Volatility creates opportunity, not risk. As John Maynard Keynes long ago opined, “It is largely the fluctuations which throw up the bargains and the uncertainty due to fluctuations which prevents other people from taking advantage of them.”However, the flaws of modern portfolio theory are clearly exposed. It should not be difficult to identify the "cream lickers" at efficient frontiers, who fail to handle the reality... Click on chart to enlarge, courtesy of GMO.
Enjoy the note in full!