MARSHALL LOEB

Time to retire

Wall Street vet of 64 years has seen it all, but says 2008 unprecedented

Last update: 7:24 p.m. EST Dec. 8, 2008

NEW YORK (MarketWatch) -- Arthur Gray, a smooth and dapper man, has worked on Wall Street for 64 years, which makes him one of the most experienced traders in America's investment community. Through profitable booms and painful busts, he thought he had seen it all. But that was before he saw the pillage and madness of 2008.

"We're living in unprecedented times," he says. "There's never been anything like this."

And, he adds, these are not the kind of times to risk investing large parts of your portfolio. So he is following the advice of the late, legendary trader, Bernard Baruch, who is credited with saying, "nobody ever went broke selling out too soon."

On Friday, Arthur Gray, at age 86, will pack his bags and submit his resignation as a senior managing director at Carret Asset Management.

"The main reason I'm doing this," says Gray, "is that as I look ahead, there doesn't seem to be real opportunity in the investment environment for years."

That is quite a concession for a man who has earned money by the ton in investments for nearly two-thirds of a century.

Sure, he says, there will be rallies in the years ahead, but they will be of 1,000 points or less on the Dow. Traders will make money on them, but they will be very short term -- some lasting only half a month or half a week. In order to take advantage of these rallies, he advises, stay very liquid and be defensive.

Safety first

He is putting fully 75% of his assets into cash and 25% into a mix of cash and short-term securities, which he figures he can use to plunge into and out of the brief rallies. The basic reason for caution, he warns, is that problems confronting the world are more basic and profound than many of us think.

"It has been estimated that there are $700 trillion derivatives of all kinds out there," he says. "That's 10 times the world's total gross domestic product. Also, there has been a real shrinkage in the world's capital."

He figures that the whole world will be in an economic slowdown for five years, although Europe will be hit harder than the U.S. because its problems -- such as declining population -- are much tougher to overcome.

Surveying this scene and casting an experienced eye forward, Arthur Gray says, "I've always been a long-term investor -- until today."

"Now I'm a sold out bull."