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Mike Kane
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I am the Founder and CEO of Hedgeable. Hedgeable is a next generation investing brand revolutionizing the retirement market. My market commentary has been featured in such places as MarketWatch, CNN Money, Forbes, Yahoo, the AP, The Washington Post, ABC News, and the Boston Globe. Hedgeable has... More
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  • Don't be Pigheaded 0 comments
    Oct 20, 2009 12:00 PM | about stocks: BWX, BND, TIP, SLV, GLD, SPY, VEU
    I get questions sometimes from people who ask me, “Mike, every time I read any of your writings or commentary, you are always so bearish on U.S. stocks, yet your service will recommend that clients invest in equities.” Yes, this is sometimes true. My retort often goes something like this:
     
    “Well, let’s pretend investing were a football game. The underdog is up 3 touchdowns in the 4th Quarter, and someone proposes the following to you- “Let’s make a wager, I will bet you $100 that the underdog gives up the lead and loses the game.”
     
    Surely, this seems like a good bet for you to take. The likelihood of a comeback is very low. So, you would probably take it. The same thing goes for investing. The market has held up relatively well over the last few months. Do I believe that we are in for a bull run? No, in fact I expect the market to normalize in the 9,000-11,000 range in the next year, but if they rise higher we will be ready to go along for the ride.

    Even classic Doom and Gloomer Marc Faber said that he expects stocks to outperform cash and bonds because of the Federal Stimulus money. Of course he also expects commodities to outperform them all.
     
    Conversely, Bill Gross recently told CNBC:
     
    “we've got a Barney Fife market….you can imagine some sort of goofy, speculative market running far too high.”
     
    But, I think it would be foolish not to not want to take advantage of the upward move. One of the lessons from this “bull run” (for the record I find this term to be offensive given the deflated value of the dollar and the market), is just this. This is what separates the practical from the ideological investors. The ideologues have a position on a market and stick to it. The practical investors are more flexible. In the end our viewpoint will probably come to fruition, but it is important not to fight the currents of the market.

    What does this mean for the everyday investor? Well, I think its vitally important to remain well protected. The current "dollar devaluation" trading could turn around and could take equities and commodities along with it. When this will happen is anybody's guess. So in the meantime, I think it would be unwise not to hold some bonds in your portfolio- BND, TIP, BWX- these are some options depending on your views of inflation/deflation and U.S. versus international interest rates.
     
    In closing, I don’t think what I am about to say will be included in any Confucian writings, but is effective nonetheless. When investing it is always important to keep one thing in mind- “Don’t be pigheaded.”

    Disclosure- No Positions
    Themes: U.S. Stocks, International Stocks, Commodities, Dollar, Devaluation Stocks: BWX, BND, TIP, SLV, GLD, SPY, VEU
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