Just like the famous song by Bob Dylan "Stuck in the middle with you", the current enviroment in the stock market is one where a person (especially someone who manages money for other individuals) cannot afford to be positive or negative on the prospects for the market. So that being said, we are simply "stuck in the middle" and the best approach at this juncture is just to "sit on ones hands", and wait. Now I've always been of the mindset that you should by at the sound of cannons and sell at the sound of trumpets...basically buy when others are fearful and sell when others are greedy. Think about it this way, when every one was talking about buying houses or flipping real estate, what was the best thing to do (in hindsight)? NOT TO BUY REAL ESTATE! I say that because most people that did buy at the top of the housing market are now holding or owning real estate that is worth less than they paid for it.
That being said, and aside from wanting to buy stocks because they might seem "cheap" at the moment, there is still to much uncertainty out there for someone to start being aggressive and buy stocks. I hate these types of situations where it feels like it's the right time to be proactive, but I feel the prudent thing to do is wait it out..consider what we are dealing with:
- gridlock in Washington
- high unemployment
- corporate earnings and profits are decreasing
- corporate outlooks (based on what the CEO's say on conference calls) is murky and uncertain
- the debt problems in Europe and how bad that could continue to be
I think we are nearing a point where we can start to "dip our toes in the water", but I need to see more clarity with respect to the U.S. and global economies. In the meantime as I've mentioned, the focus needs to stay on special situations and high yielding dividend stocks. Two examples of these are Etrade (ETFC)possibly being bought by another financial firm, and a high yielding dividend stock like Chimera Investment Corp (CIM) which currently pays a yield of 16.5% a year. As much as I'd love to buy General Electric stock (GE), which is trading at a cheap "valuation", the outlooks for GE's global businesses is still somewhat foggy.
So until we see things start to change, we will be "stuck in the middle with you", as the markets will continue to trade sideways...
In full disclosure, some of our clients own ETFC and CIM.
