"What we've been explaining to investors down here," continued a colleague from Empiricus research, "is that you can't know the future. You can only prepare for it. And you do that by putting yourself in a position where the surprises are more likely on the upside than the downside.

 

"You just don't buy expensive stocks, for example. You don't know whether they will go up or down. But a surprise to the downside is more likely and more painful than a surprise to the upside.

 

"Some people refer to this as value investing. But we don't really know what's a value and what is not. Ultimately, we only have prices to guide us. And prices are very unreliable. So, we just look at what surprises might come... and what impact they will have on us. 

 

"I mean, I know I will be surprised. So I want a surprise that I will like. And the way you get that is by making sure you always have more upside than down side.

 

"You look at the US stock market now and what you see is millions of people who are all sure that the market is going up...as long as the Fed continues to add money to the system. When the Fed stops, they think they are going to get out.

 

"But when everyone wants to sell, who will they sell to? So, in our view the surprise is likely to be on the downside...and it will be much more painful than a surprise to the upside. So, what will happen? We don't know. But we tell our people to stay out of the stock market in Brazil...and America."