The Flinchum File
Thoughtful Economic Analysis and Existential Opinions

On The Other Hand …


Bob Doll is the highly-respected chief equity strategist at Nuveen Asset Managment.  In his commentary yesterday, he stated “a slowly growing economy, improving earnings, and low bond yields should provide a tailwind for U.S. equities.”  Despite the unexpectedly low 1.2% GDP growth in the second quarter, I agree with him.

Yesterday, the equally-respected Jeff Gundlach of DoubleLine said “investors seem to have been hypnotized that nothing can go wrong.”  He advocates selling everything and buying gold.  Despite the certainty of a recession somewhere in our future, I disagree with him.

One of the best practices in portfolio management is avoid making 100% bets, and selling everything is a 100% bet.  If you are that concerned, just increase your cash position to, say, 25% and allocate your remaining stocks into consumer staples, which normally weather recessions fairly well.

Another thought is “that’s what makes a market!”  Every time you buy a stock, there is a seller who doesn’t want it.  Every time you sell a stock, there is a buyer who thinks that stock is a good deal.  Investment strategists are the same way.  Some are bullish, and some think the sky is falling.  That’s what makes a market for ideas!

There has never been a day in American history when somebody was not standing on a street corner, wearing a sign that says “the end is near.”  Listen respectfully, and then . . . be brave!


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