"I took profits as SPY peaked and now I’m looking for another buying opportunity."Yesterday near the record high, my newsletter's "Explore Portfolio" was roughly 66% in stocks with about 19% in cash and the remainder in individual US Treasury bonds.
Below is good advice via email at 7:11 AM PST from Terry Savage.
Don't Join the Brexit Panic!
The U.S. Stock market opened down 500 points this morning -- as the global markets were surprised overnight by the vote of Great Britain to leave the European Union.
The British pound fell 11 percent overnight -- to a 30 year low. Money fled to the United States, pushing the dollar higher, and to Japan, pushing the yen higher. And scared money rushed to gold, up $68 in early going this am to $1331/oz.
Markets around the world are adjusting to this new situation -- which will take at least two years to play out. Global trade will be disrupted. A strong dollar is bad for U.S. multi-national companies, whose products will be more expensive to buyers abroad. That's bad news for the U.S. economy -- for corporate profits, for jobs, and for growth.
All that money rushing to safety in the U.S. has pushed Treasury yields even lower (buying demand pushes prices up and inversely pushes yields lower). The Fed certainly can't raise interest rates now.
A brighter perspective: That influx of money seeking safety likely won't sit in low yielding T-bills or CDs. Instead, being "smart money" it will seek out dividend-paying U.S. stocks -- and so eventually could be a positive force in our stock market.
But no doubt, today, and next week, and perhaps the next few months will see volatile times for the U.S. market. Over the weekend, there will be margin calls -- forcing even more selling on Monday. There will be room for panic selling to continue.
Don't sell into a panic!
You know that rule! And definitely don't sell out of your mutual funds today. If you panic and put in an order this morning, you'll get today's closing price. That will lock in a big loss.
The world will reorganize itself; it always does. And your retirement is years away. America is still the best place to invest in the world -- and looking even more attractive now.
And now you see the benefits of having "chicken money"!
Cash looked ugly and boring last week, last month. But if you stuck to your plan to keep some cash on the sidelines, you'll be able to sleep tonight. And maybe even to buy some bargains in the months ahead.
That's The Savage Truth!
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Chicago, IL, US, 60610
Currently, my "Explore Portfolio" is down about 2.4% from yesterday's peak value. This could just be "noise" and another of the 3 to 8% pullbacks. I prefer to have more than a few percent to call it a buying opportunity, but maybe some of the individual stocks will correct more.
It could take awhile to play out so I'm in no hurry. The nice thing about a large cash position mixed with high beta stocks is you can beat the markets when they are going up while still having cash for the big declines.
Kirk Lindstrom's Investment Letter:
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