MW Wall Street's 'smart money' bought gold and silver just before they crashed. Learn from their predictable mistakes.
By Brett Arends
Fund managers' timing is perfect, as usual
It should surprise absolutely nobody that global fund managers were heavily overinvested in commodities just before commodity prices collapsed at the end of last week.
The most recent monthly survey conducted by BofA Securities shows that these geniuses stampeded into commodities in January, ramping net exposure up toward record levels - even though they also agreed that gold (GC00) had become massively overvalued and that exposure to gold was the single "most crowded trade" in the market.
Gold has now dropped nearly $1,000 an ounce from last week's peak, and silver (SI00) - known either as "the poor man's gold" or "gold for suckers," depending on whom you ask - is down by a third.
Read: 'I'm spooked': Do gold and silver belong in my retirement portfolio after their dramatic fall in value?
Brilliant!
To be sure, gold and silver are still much higher than they were one year, three years or five years ago. But that, sadly, was when fund managers were much less likely to be buying them.
Much more worrying, though, is that the fund managers' wild euphoria didn't stop at gold and silver. According to the latest BofA survey, they are now as high as a kite. Their overall exposure to stocks as well as commodities is near record levels. They are at the most bullish since July 2021. They have taken out the smallest amount of downside protection in about eight years. Meanwhile their exposure to low-volatility assets, meaning bonds and cash, is near record lows.
Heaven help us.
These fund-manager surveys are essential reading for investors because they are good guides to where sentiment has become either too bullish or too bearish. Among other things, they inspire this column's occasional "Pariah Capital" feature, where I like to imagine how you'd fare if you just did the exact opposite of the Wall Street consensus.
This idea started many years ago as something of a joke, but it has turned out to be absurdly successful. In most years you were able to beat the market just by doing the opposite of the big-money professionals managing the world's major investment institutions. This is either hilarious, horrifying or both, depending on how you look at it.
In January last year, fund managers were heavily underinvested in seven asset classes, which I took to be the Pariah Capital portfolio for 2025. They were bonds (e.g., AGG), cash $(GBIL)$, natural resources stocks $(GNR)$, real estate $(VNQ)$, consumer staple stocks $(VDC)$, consumer discretionary stocks $(VCR)$ and U.K. stocks (meaning either something like FLGB or, probably better, a split between that and smaller U.K. stocks through EWUS).
Absurdly, once again, Pariah Capital has managed to beat the indexes (which, if you follow the fans of the late Jack Bogle, should not be possible). Between Jan. 22 of last year, when that article was published, and Feb. 2 this year, that portfolio would have earned you 14.9%.
That's nearly 3 percentage points more than the so-called balanced portfolio of 60% U.S. large-cap stocks and 40% U.S. bonds, as represented, for example, by the Vanguard Balanced Index Fund VBAIX, which earned you 12.2% over the same period.
(You did even better if you used Vanguard's world bond fund, BNDW, instead of a U.S.-only bond fund like AGG.)
This isn't a false comparison, either. Pariah, with comparatively high holdings of cash, bonds and lower-volatility assets like real-estate investment trusts and consumer staple stocks, was an inherently low-risk portfolio.
Pariah Capital beats the indexes most years, often by a wide margin. This is not an accident. The fund managers represent the dominant consensus on Wall Street, and markets are liquid: Prices therefore reflect opinions that are already prevalent. If everyone is bullish on frozen concentrated orange juice futures, for example, the price for them will already be high.
For 2026, the Pariah Capital portfolio is very easy. According to the latest survey, fund managers are overweight - meaning overinvested - in almost everything. There are just five major exceptions: cash, bonds, consumer staple stocks, energy stocks and British stocks (again, despite a boom last year). So let us consider Pariah in 2026 as investing 20% each in GBIL, BNDW, VDC and XLE, plus 10% each in FLGB and EWUS.
There is of course absolutely no guarantee that this portfolio will outperform the broader stock and bond indexes, or indeed anything else.
It's worth adding that this exercise isn't merely tongue in cheek, but it also relies on judgment - OK, guessing - as much as science.
For example, why should we use regular, nominal bonds when we have the option of inflation-protected ones?
And when we are looking at investments that are currently out of fashion, where do we draw the line? For example, the latest survey says fund managers are also somewhat underinvested in utility stocks $(VPU)$, consumer discretionary stocks (VCR) and real-estate trusts (VNQ), although not to the same extent as the five assets listed above. If you wanted to stretch a point and include those, it might make sense.
Oh, and if your benchmark is 60% stocks and 40% bonds, shouldn't Pariah hold more than 40% in cash and bonds?
Naturally, in the spirit of Wall Street analysts, I reserve the right to claim next year that I recommended whichever version ended up doing better. More seriously, all I can do is report on what is most out of fashion.
Given the extreme levels of bullishness now sweeping through fund-manager circles, I wouldn't be remotely surprised if large holdings of cash and bonds turn out to be better investments than the usual suspects currently expect.
But only time will tell. Happy hunting.
-Brett Arends
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February 03, 2026 12:43 ET (17:43 GMT)
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