THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING.. RELY ON NOTHING STATED HEREIN.
Wow, what a rollercoaster ride. Friday served as a sober reminder of how interconnected and fragile is the world economy. All the wonderful gains of the week were wiped out in one day. Riots in Egypt and the Dow falls 166 after flirting with a 29 month high the day before. And the NASDAQ suffers even greater losses based on Egypt and some minor disappointments. ( I smell some real opportunity there).
There are some lessons to be re-learned. First and last---diversify, diversify and DIVERSIFY. I had steadily reduced my gold position to zero as of Thursday, harvesting some handsome gains. Come Monday, I am back in ----GLD and a hard look at Novagold. There is no better hedge against disruptive news. Also, hats off to my bride who has insisted that we never reduce our cash (MMA) position below 25%.. Next to gold, the greenback is still the best place to be in times of crisis.
I note that the decline was not across the board. Boring holdings like AIG debt and bank/insurance preferreds (BACpL; ZBpC; AXSpA; AHLpA) actually gained. The most fascinating movements were in oil stocks. Those with mid east exposure ( RDS, BP) fell while those invested heavily or exclusively in North American/Gulf of Mexico (COP, ERF, BPT, PBT,SBR) did quite well, a fact noted by IBD this morning. This is something to consider for those interested in the oil patch. Speaking of oil, BP reports on Tuesday. If Egypt stabilizes, BP, which has taken a beating this week, may see a bump especially of Mr. Dudley announces a dividend as speculated in today's Financial Times. Note, not a word of this dividend was mentioned in either the WSJ or IBD. If the dividend is announced, it will prove again that the best financial daily in the world is the FT. If Egypt stabilizes, other great opportunites exist. Ford dropped 9% on Friday with a huge miss below Wall Street's estimates (but a great year). I smell opportunity
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