by Jon Anthony
Lately I have watched a famous Wall Street TV personality tell his viewers that the first thing they need to do to protect them in a market like this is buy stocks that you find at the grocery store. Companies that make Ketchup and Cigarettes, companies that also pay a nice dividend.
On another show; I see the stock market pros telling us we need to be long Gold and Oil. Again, flight to quality with good dividends. Now, all these guys are well meaning, but to be an informed stock trader, it requires us to look under the hood at the nuts and bolts to find some real answers.
First, no sectors were up this week. The worst sector this week, GOLD, down 9%. Right behind GOLD, you guessed it, FOOD(Supermarkets), down 6%. So clearly, so far, this flight to safety has resulted in no less than a 6-10% loss of investors' money in 1 week. None of the companies mentioned on these stock shows will pay you enough in a dividend to get that back.
The second problem with this strategy, is when the snap back happens, it for sure will not be these companies that lead the way. In fact, I would be willing to bet these TV pros, that these stocks will lag favorite names such as GOOG, AAPL, CSCO, etc.
Bottom line, it is going to come down to good stock picking, not sector ideas, or things that worked in 1987, that will get you through this blood bath. We have to evaluate each stock on its own, against the backdrop of the market with the question, are we close to a bottom yet, and is it safe to wade back in? This is the strategy we are currently following.--Jon
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