Thursday, March 22, 2012

And Now for Something Completely Different, Again: Investing in the Eurosclerosis Age

He knows what he's doing, right?!?

It's a bit too late for me to act on this recommendation, but that's no excuse to not share it with you. I'm all in money-wise, right now I've got no more. Yet maybe I've already made my plays, we'll see. (Already socked in some high-yields and some cyclicals, etc., fund-wise.)'s the scoop: My first reaction to Europe's Really Bad Horribly Bad Austerity Day was, OMG our stock market is going to tank! Uh, maybe not. How about an alternative scenario? it is: If Europe's going to austerity itself into a recession (already happening), it doesn't necessarily mean we're screwed in the U.S. Okay, sure, the situation becomes dicey, but, uh, where are the Europeans that can afford to get crazy -- you know who I'm talkin' about, oligarchs! -- going to put all their money? In the Eurotrash bin? I don't think so.

I know, everybody sez it's all global now. But is it? What if smart Europeans say to themselves that maybe now isn't the best time to buy Braun or Daimler or whatnot, especially when we trashing our Euro Zone while America is on the rise? Maybe, the Euro-non-centrics say, wait a minute, I'm throwin' my juice where it might not stink, in America!

Talk amongst yerselves.

Hey, Angela, thanks for the GM tip!

Just to be clear: What I'm saying is that there are reasons to be hopeful that the stock rally that we've had since last fall is not due for a major correction even though conventional wisdom points to one. Not only does the world need some place to put its money and might choose the U.S. because of lowering demand in Europe and Asia, but also there's the fact we're in an election year. Even if the Republicans would like to see us in economic trouble to improve their election chances, institutions like the Fed often make quiet plays to stabilize, even improve markets during election years. QE3, anyone? Or watch President Obama open up the oil reserves to quiet the gasoline market, which also tempers oil prices.

If there is a bottom line, I'd say that the market is due for a long, sideways motion, maybe all the way to November. It's a good time for consolidation and retrenchment, not retreat. So staying in, going for high-dividend, high-yield stocks makes sense. The bond market? I don't know. yields are going up, but prices are coming down. When to buy bonds? Probably when the smoke clears in stocks or after that major correction I'm suggesting won't happen soon. So find a safe way to be 20-40% in bonds. I'm a fan of the Treasury product called I Bonds, which indexes for inflation. Check them out at TreasuryDirect.

I know it's hard to believe, but I've got your back.

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