What Are You Reading - Barron's 2013 Roundtable

I will detail in a future post what book I'm currently reading and the tips that I've picked up along the way.  But for now I am going to try and help you (1) Learn from some of the smartest investors in the game and (2) Observe some of their best picks for 2013.  The link I will post is from Barron's and their Roundtable discussion 9 notable investors.  I instantly recognize from CNBC the familiar names (and faces) of the following investors:

• MARIO GABELLI - Dr. Love (He enjoys companies merging or making love and has a nice track record to prove it.

• BILL GROSS - PIMCO Bond King 

• ABBY JOSEPH COHEN - Goldman Sachs Strategist

But then reading the insight from the other 6 panelists left me very with some very good insight from each of these investors predictions on what to expect from the market in 2013.  The other gang of 6 were:

• Scott Black
• Fred Hickey
• Brian Rogers
• Oscar Schafer
• Meryl Witmer
• Feliz Zulauf

I am slowly becoming a sponge of information about what is happening in the rest of the world and really enjoyed Feliz Zulauf's commentary.  I also love to hear them quote history because I am a firm believer that it repeats itself , however; humans never take the time to listen.  This article also include stock selections and may serve as a great place to start for new investments in 2013. 

Barron's Rountable Part I

Barron's Rountable Part II

The Market's Continuous Drop...

I've been listening to some smart investors talk about how to invest in an environment like this.  These theories vary and this helps me shape my frame of reference.  It allows me to hear how bankers, investors, and politicians think and then I can ground some of that in reality because I can probably tell what's going on with the everyday person better than they might experience.

Right now we are in rapidly changing times in the US, some parts of the world and of course in the stock market.  The stock market has been violently gyrating and for the last few weeks it has been decidedly lower.  The smart money will tell you not to panic and while I subscribe to this theory it can be very difficult.  The economy is weak and some are reporting the increasing risk of a double dip recession.  For me, I go with my gut feeling and I have stayed consistent that too many Americans are hurting for anyone to be blindly buying stocks.  I agree that certain actions along the way have helped to stimulate the economy but not enough has been done to help alleviate the areas that the average citizen is being hampered by.  I believe the economy will continue to be fragile until: 1) Jobs return in a consistent fashion 2) Debt levels for the average American must get rightsized, and 3) Housing burdens for the average person become less of a constant drag on people and their local economies.  I'm not happy with the fact that are politicians can't stay focused on some of these core issues that are plaguing us today and make this their top priority.  So I will remind you to not get fooled by their gimmicks of last minute deal-making and understand that this slow painful decline will continue until they address the real problems at hand.

I do wish I had sounded a louder alarm because I've noticed that many big investors had recently been hedging their bets and protecting themselves if things got bad.  And as you can see they got bad in a hurry.  I think my approach will not change from the points I've been highlighting from the beginning of the year, and that is this is the YEAR OF DEFENSE. See the following articles to learn what we've been doing to stay defensive in these uncertain markets:

Wall Street - The PULSE

Hey everybody I am back to hit you with a quick post to keep you in the loop with what's going on in the stock market. By now, I know the average person is paying attention on a daily basis because I get a weekly call from my sister asking me about why things are falling or more importantly what should I be doing with my money. And if you recall when you don't hear much from me I am usually doing one thing and that's reading. I am constantly reading about what everyone has to write and listening to what everyone has to say...to get a feel of the market's temperature. How can you do this?!?! Well simply start by tuning in here as often as you can to get a pulse, not always daily but a frequent pulse as to what may be changing out there. And if you get tired of reading, check out CNBC's homepage and select the VIDEO tab for very frequent video posting of their on air show.

Wall Street's Pulse - Awhile back I compared Wall Street to a prized fighter that was down and out, maybe like one of my favorite fighters Roy Jones Jr. The latest prognosis is still not that good...the patient needs help getting up in the ring right now and the count keeps going to about 8 (get to 10 and the fight is over). For those of you that don't know what a knockout blow is for Wall Street, well its would be a depression. And the trainers right now are the Obama Administration, The Treasury Department, and The Federal Reserve. They are constantly looking at the fighter, checking its vitals, and assessing how to help him keep fighting. But right now the vitals of Wall Street do not look good:

• Unemployment numbers continue to rise and have now been estimated to reach over 10% within the next year or so.
• Companies continue to cut jobs left and right and give not so rosy outlooks for the rest of 2009
• Consumer Savings rates were above 5%, which is at levels that we haven't seen in a long time!
• Retail Sales numbers are barely off their lows, which means people ain't buying!
• The consumer and companies are still having difficulty getting access to capital.

Investors (who are like the fans in the stands) have sobered up to these realities and almost given up on the fighter, but the trainers keep working. And their work seems to be helping the fighter get a little bit better:

• Banks are receiving more and more capital
• The stimulus plan and housing bills are aimed at helping home owners and generating jobs
• There is talk about adjusting mark to market (how banks place a value on assets they own)

What this has done is given the investors a little bit of hope that the fighter may come through and still win the fight. So they have started cheering louder and louder and the fighter has responded. The stock market has rebounded off of its March 9th lows and the banks have come back roaring. But its almost as if the crowd (investors) forgot that the fighter is still hurt and hurt badly. That's why may believe that the stock market is in a BEAR RALLY. This means alot of people think the fighter is healthy but in reality he's not. And soon those cheering fans will see the fighter get knocked down again and they will not cheer as loud.

Now onto what I believe and what I'm doing:

I believe the fighter is still hurt badly which means don't cheer (or buy stocks just yet). I truly believe that safer alternatives are out there and should be evaluated for your portfolio. I still like OWNING CASH, and not doing a whole lot especially in your retirement portfolios...don't be the hero or the only one cheering when the fighter just got knocked down again. Invest in safer alternatives:

Cash
Gold (GLD)
High Yield Corporate Debt (LQD)
Municipal Bonds (TFI)

And if you feel like you need to be in the markets, be careful and be a bottom feeder...the nastiest thing out there. Wait until things gets really bad and nibble on the most beaten down sectors. For instance I do this when the banks look really bad, like when everyone though Citigroup was going out of business and I buy just a little bit of the bank stocks ETF on steroids (FAS)...it gives me 3X the returns of bank stocks, but I bite just a little. And when things start to look like they are on a roll I sell. I don't panic about selling to early because in a few days I start to look for a point to be a top feeder and bet that things will come back down and buy the FAZ, which bets the banks will fall...TIMES 3X! But don't stick around to long in these trades or else you'll be writing me with heartburn as I have often had, but irrational fans sober up eventually.