May 19, 2012 My Name Is Johnny Cash

Risk/Reward Vol. 119

THIS IS NOT INVESTMENT OR TAX ADVICE. IT IS A PERSONAL REFLECTION ON INVESTING. RELY ON NOTHING STATED HEREIN.

"I don't want no aggravation/When my train has left the station
If you're there or not/I may not know"---lyrics from "Let the Train Blow the Whistle" by Johnny Cash

"I fell into a burning ring of fire/I went down, down, down
And the flames went higher/ And it burned, burned, burned
The ring of fire, the ring of fire"---lyrics from "Ring of Fire" by Johnny Cash

"I was told to grease his palm/To walk from school without fear of harm
He knocked me down and took my dollar from me/And he lay these pearls of wisdom on me
He say, business is business, nothing is free"---lyrics from "Business is Business" by Johnny Cash

If you can not tell from the lyrics above, this Johnny is in Cash. "I don't want no (more) aggravation". So I loaded my profits (albeit less than those of a month ago) on the train, "left the station" and headed to Liquid City. "I don't know if you were there or not", but I've been blowing the exit "whistle" for some time.

The reason is simple. I did not want my year-to-date gains to "fall into a ring" of Euro crisis "fire". I refused to watch them go "down, down, down"; or to "burn, burn, burn" as the "flames of (sovereign debt) went higher." As the week unfolded, the stock market posted losses each day, the flight to safety continued (the 10 year US Treasury is at record high prices and record low yields) and a Greek exit from the Eurozone became more likely. The signal was clear----exit.

There may be other reasons for this mess, but one stands above all. For the third year in a row, "Grease" has its "palm" out---demanding another hand out from other Eurozone nations while refusing to curb its profligate spending on government jobs and retirement benefits (sound familiar?) Will the rest of Europe acquiesce and kick the problem down the road for another few months like it has for the past three years? Or will this be it---will "business be business"? Either way, at some time--and soon---something has to give, because "nothing is free." And whenever and however it comes, the "knock down" will not be pretty. The collateral effects of a Greek exit (followed perhaps by one from Portugal and a Spanish meltdown) are a huge unknown. And the stock market hates unknowns.

So, I am on the sidelines. In times past, I would be lamenting this development--but, no more. If I am going to a savvy investor, I must learn to prosper from these events. As of today, I have made a decent profit this year---and I still have most of it. I believe that staying in the market into the foreseeable future would erode those profits and likely would result in a loss. Just like last year, I see the Dow falling into a trading range 10-15% below today's close until clarity on the future of the Euro appears---which may be just in time for the uncertainty of our November election and the Fiscal Cliff discussed last week. No good news is coming from China, and South America (most notably Brazil) is experiencing negative growth.

So, let the decline continue. I will look for an opportune time to re-enter--slowly at first. Undoubtedly, I will make some false starts, but at some juncture (like last December see www.riskrewardblog.blogspot.com Vols. 99 and 100), I will know the time is right, and I will deploy substantial capital to good ends. Patience, study and discipline.

If "I Walk the Line", prosperity will be mine.