Today, is a pivot point.
I've again increased allocations to funds specializing in US companies with significant overseas operations and markets, foreign dividend-paying stocks, and precious metals.
The reason? An internal alarm bell went off when news came out about Bear Stearns and their liquidity problem. Though shocking enough, that wasn't the trigger for the alarm. What was the trigger was that CNBC had interviewed Bears' CEO 2 days ago and he indicated that all was well (generally speaking). I agree with the announcer (a rare event in itself), that the CEO appeared to have no prior knowledge of this problem during the interview. That's what scares me. How many others (ML, SB, Wach, etc.) are sitting on ticking time bombs and they don't know it? The major banks could also be sitting on ticking time bombs, but they have access to the Fed to bail them out without making headlines.
Many of you know that I am generally bearish on the US for fundamental reasons. However, I haven't built the bomb shelter (yet) or dumped all my clients' assets into precious metals funds. To do so, at this stage of the game, would be foolish (in my humble opinion) and would incur the wrath of my clients, as well. My game plan is to look for significant sign posts along the way that tell me which way to shift a percentage of assets.
It's not a science, it's an art. Right or wrong, it makes logical sense to me and many of my clients.
My primary fundamental reason for being bearish on the US is that many of the economic stats the market relies upon are flawed...on purpose: CPI, GDP, unemployment, etc. I say "on purpose" because politicians have changed the way econ stats are measured, relying primarily on computer models and whatever was politically expedient at the time. For comparison purposes, employing the old way of measuring the economy says that we are now experiencing a CPI of 10+%, a negative GDP (for 3 quarters in a row), and an unemployment rate of over 10%. (Which stats seems closer to the truth to you, the new or the old?) Relying upon these "flawed" indicators gives a distorted view of the economy, causing all kinds of foreseen and unforeseen problems.
However, to panic and dump everything into precious metals now would be a mistake, in my opinion. The market is based on perception, not reality. It could be years before "reality" sets in. So, I've chosen to make defensive allocations as these periodic sign posts pop-up, lending credence to my theory that the economy is fundamentally flawed and unless we come to grips with the "reality" of it, the pain will only continue.
Hey, I could be wrong! Do your own due diligence!
Today, is a pivot point.