An Alternative Macro View

by: Regarded Solutions

Lately I have been reading that the catastrophic Eurozone mess will cause U.S. stocks (or S&P index) to drop up to 30% or 40% and that what we are currently seeing is an "obvious" bear trap run up until all Hades breaks loose.

James A. Kostohryz is brilliant and is an amazing writer with such a handle on the intricate economic world around us that I am always in awe of his work here on Seeking Alpha. However, since I am a glutton for punishment, I respectfully disagree with several of his premises, his 100% cash position advice and his index forecast, for the following reasons:

1) It is an election year, and politics have never changed
2) Our economy is showing signs of recovering
3) Short Interest is up, which is a bullish signal to me
4) There is no place else to put money to work
5) Corporate earnings while not great, are better
6) There is an absolute ton of money in bonds and on the sidelines ready to start seeking better returns
7) The USA has been the flight to safety in the world and will continue to be
8) Our stock market has held up in the face of the EU folly
9) That day of "reckoning" for the PIIGS to implode seems to always be saved "by the bell". Why should it be any different now, or in March or April as James opines. Just because they cannot live up to commitments? When have they ever?
10) If I am inaccurate about 2-9, see #1

All of this being said, I do agree that markets will never go up forever, or down forever. There will be pullbacks, dips, backfilling, rotation and fear that will cause some turbulence. There will also be a better job market, better consumer confidence, more consumer spending, higher wages and greed, that will cause more updrafts.

I have a very simple view of the world around me I suppose, and I stopped inspecting every follicle on my head a long time ago. I have hair, less than 30 years ago, but that's it.

I suggest taking a step back from the forest so that we can actually see the trees, and watch diligently before acting, never run away in fear, and always take measured steps with our investment balance.

My Opinion

I believe that we have seen a solid run up and could be looking at some profit taking in the short term. I see them as opportunities, not a desperate call for folks to be 100% in cash. (They shouldn't go 100% in equities either.)

The investment goals and risk tolerance must be evaluated by every individual investor. Strategies are developed that way. Panic is not a strategy, it is a short-term reaction that could potentially derail a well-balanced portfolio.

What should we do with our "Retirement Strategy Portfolio" which consists of ExxonMobil (NYSE:XOM), Johnson & Johnson (NYSE:JNJ), AT&T (NYSE:T), General Electric (NYSE:GE), Annaly Capital (NYSE:NLY), Exelon (NYSE:EXC), Procter & Gamble (NYSE:PG), McDonald's (NYSE:MCD), Philip Morris (NYSE:PM), Intel (NASDAQ:INTC), Realty Income (NYSE:O), ConocoPhillips (NYSE:COP), Pfizer (NYSE:PFE) Chevron (NYSE:CVX), E.I. du Pont (NYSE:DD), Duke Energy (NYSE:DUK) and PPL Corp. (NYSE:PPL)?

As far as I am concerned, I am looking to ADD to our portfolio. How about you?

* Please do your own research prior to making any investment decision. The opinions here are that of the author and are not recommendations to buy or sell any security.

Disclosure: I am long XOM, JNJ, GE, NLY, EXC, PFE, T, INTC, O.