I've advocated holding large cash reserves and gold bullion for some time. I also have favored gold bullion over gold stocks for reasons previously explained. With gold bullion up nearly 3% today, it is now up 20% so far this year, while GDX, the ETF of leading gold mining stocks, is off 10% before today's likely drop. That's a performance gap of 30 percentage points in only seven months!
I reiterate that now is time to begin investing some of the large cash horde. It may not be the ultimate bottom in the market, but stocks are massively oversold and likely to have a snap-back rally soon. Blue-chip multinational stocks are my favorites here, as their dividend yields are often higher even than the coupon on most 30-year government bonds around the world. I also like agriculture as a long-term theme, and farm equipment makers Agco and CNH Global, for example, plunged 16% last week alone and now have p/e's of 10 times current-year earnings estimates.
I am definitely not optimistic about economic growth or profit estimates, but the stock market often moves sharply opposite of what the conventional wisdom would expect, particularly with respect to the economy.
While I'd like to see some market sentiment measures--such as the put/call ratio--reflect even deeper pessimism, the rush to sell anything but gold and bonds is resulting in some intriguing values in the stock market.
Steve Lehman
LehmanInvest.blogspot.com/
S & P 500: 1200
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