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Barron's Calls a Bottom

I'm bemused by individual investor psychology a lot these days. People were buying stocks hand over fist last year at 15k, but are now selling at 6.5k. I'm not suggesting there aren't problems, because obviously there are. However, the world is not going to end despite what a few people believe. All I know is that you don't get rich buying high and selling low. Quite the opposite.

I've heard "it's different this time because it's global." Yes, that's true, but the response is equally global. Central banks and governments around the world are providing liquidity and stimuli like there's no tomorrow. At the least, this will cushion the landing.

At the end of the day, your emotional responses are your worst enemy when investing. Volatility invokes your fight or flight response unless you've trained yourself.

Is now a good time to keep extra cash ready? Yes.
Is it also a good time to increase your equity purchases or shift some allocation from fixed income to equities? Yes (assuming your time horizon is sufficiently long). Am I suggesting putting on full positions? No, of course not.

Inflation will return. You can bank on it. I don't know when exactly, but at some point this coordinated global effort will inflate prices if the Chinese don't do it all on their own with their $1.8T in reserves.

I started nibbling on the long side last week after sitting largely in cash since October. Names I picked up included DELL ($4/sh in cash, virtually no debt, $1.25ttm EPS, so even if earnings fall by 50% its less than 7x net of cash), EMC (also about 7x net of cash, with high earnings visibility from its recurring contracts), GE (Sold @ $24 & $13, believe the CDS volume doesn't even come close to suggesting the kind of trouble priced into the stock, happy to invest at a discount to BRK), UYG (long @ 1.7, believe the upside potential is several multiples if not a magnitude greater than the downside, compare that profile with SKF). I also added a little LQD and JNK to reduce my overall cash position. Other names I'm watching include WMI, KO, K, PHO, FXC.

On top of the fact that everyone thinks the world is coming to an end, I think the newsflow this week will be positive with 1. Madoff potentially pleading out, 2. a potential moderation of mark-to-market accounting, 3. maybe more discussion of bringing back the uptick rule. With all this said, I am fully prepared to buy another round of equity if the market falls to 5000. In fact, I would welcome the opportunity. It is in the darkest days when fortunes are made and lost.