Jeffrey Saut: "Terminator 3: Rise of the Machines"

As for mutual fund investors, on PBS’s “Nightly Business Report” last Monday, I mentioned two funds. The first was Goldman Sachs Dynamic Allocation Fund (GDAFX/$10.53), which seeks to manage the portfolio’s level of volatility more actively than is common in a traditional 60% equity / 40% fixed income fund. Adaptive to extreme market conditions, the fund can potentially move to less risky assets during periods of significant financial disruption with the ultimate goal of improving overall portfolio performance. The second fund mentioned was MFS’s International Diversification Fund (MDIDX/$12.82) on the assumption most of the world’s markets have suffered more than the U.S. and therefore offer attractive valuations. And yes, for fixed income allocations, our vehicle of choice remains Putnam’s Diversified Income Trust (PDINX/$7.69).

The call for this week: While people who live in glass houses should not throw rocks, I have to observe how the media has trotted out super-bear Robert Prechter at every major stock market “low” for the past decade. They featured him again last week. Also in the media’s parade of “bears” was Don Peck, author of a book titled “Pinched” that should not be read after dark. Then there is The Economist magazine’s cover this week titled “Time for a double dip?” Combine such anecdotal gleanings with the aforementioned market valuation metrics and it suggests a downside inflection point may have been reached. And while the bottoming process should take weeks, many individual stocks have likely already bottomed. Accordingly, last week I constantly repeated the Jimmy Rogers story. As reprised, when asked how he made all of his money, legendary investor Jim Rogers replied, “I sell euphoria and buy panic.” The way he determines that is to wait until prices start gapping in the charts. Gapping on the upside is euphoria, while gapping on the downside is panic. Hence, for the past seven sessions, my advice has been to sell partial positions in upward gapping precious metals and Treasuries (even though I think gold trades higher longer term; not so, Treasuries) and have recommended buying the “panic” in stocks.


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Copyright © Raymond James

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