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When I was in Las Vegas several weeks ago for The Money Show, I joked with one of the other strategists that conditions were so ugly that I was going to move my entire portfolio into cash and wait for the rest of the Strategy Lab group to come back to me.
At the time, I had just fought my way back from last place and almost 10% down to fifth place and a couple of points up. He laughed and said that might not be such a bad idea.
I was only half kidding, which might explain why I kept half my portfolio in cash.
After the past two weeks, I wish it had all been in cash. This is a very ugly market, with no obvious catalyst on the horizon to switch momentum. Interest rates aren't going lower, the economic data aren't getting better, the banking woes aren't going away, and earnings aren't about to improve. To make matters worse, oil and food prices will continue to march higher.
Too soon for bargain hunting?
So about the only thing working for stocks is that as they move lower, they become cheaper, but that matters only if there's a compelling reason to step back in. And frankly, I'm finding it hard to come up with a reason investors would want to own U.S. stocks, at least over the short or intermediate term.A lot of U.S. stocks that were cheap a month ago are simply cheaper today -- in many cases, 10% to 20% cheaper. That's a big loss over a short time, and it shows the danger of bargain hunting too soon.
Strategy Lab is an educational forum as well as a contest. So, we are supposed to show you the methodology behind our strategies, which we can't do effectively if we don't trade. So even though I would prefer more of my portfolio to be in cash -- the same probably holds for others in the group -- that wouldn't be playing the game according to the wishes of the hard-working MSN Money folks who run the Lab.
Consequently, I'll pinch my nose and use the recent weakness to add 250 shares of Deere (DE, news, msgs). Though construction and agricultural stocks have taken it on the chin in recent weeks, I think they will be among the first to win back bulls once momentum turns, even if only for a brief period.
Deere is an extremely well-run company with solid financials, discounted valuations and tremendous growth prospects overseas, where it stands to benefit from the weak dollar. The stock is at or near key support at $70 a share. A bounce to the low $80s over the next few months is well within reach.
Meanwhile, MEMC Electronic Materials (WFR, news, msgs) has broken down badly, breaking key supports this week on the way down. I'm selling all shares at today's market open.
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