Could We Learn a Lesson from Wiley?

Remember when Wiley Coyotte would chase  Roadrunner off the edge of a cliff? There was always that awkward passage of time as he sheepishly tip-toed back to the edge only to plunge to the valley below. Recently, I have heard our economy’s current state described using this cartoon from our childhood. Why is it that Wiley never has a parachute?

It is likely that our economy will experience a double dip recession and investment portfolios should recognize this potential. As we enjoy this record recovery in securities prices, one cannot help but think what will happen if the economy slips into recession again. Now is the time to have your strategy in place.

Meredith Whitney, the bank analyst who predicted last year’s collapse of the credit markets was quoted in the financial press today as being more bearish now than at any point in the last year. I agree.

That being said, we’ll enjoy this bear market rally while it lasts; always with an eye for the door though.

“Aint it great” is a phrase I remember hearing as a child. You see, I had family members who were active Amway distributors. I have fond memories of listening in on meetings in which the presenter drew lots of charts and circles, explaining how everyone could “live on Easy Street” if they would embrace the Am Way. I for one never quite understood the charts and circles but it didn’t matter because all of the grown-ups kept saying “Aint it Great!”

Investors I guess feel the same way these days. Can’t figure out why the market keeps rising but …. “Aint in Great!” Frankly, stock fundamentals stink but the charts look terrific. Market technicians, those brainy folks who track market momentum and investor emotion, are creating charts and drawing circles. Many of them see opportunity as cash re-enters the market from the sidelines.

That being said, when the trend reverses, be prepared for a significant market correction. We have a strategy to protect protfolio values. Do you?