The End of A Strategy

Yesterday I sold off my entire portfolio. After nearly nine months of high churn and mediocre investments, I decided that I was lucky to be at break even and that it was time to chart a new course.



The market is rallying and I do not know why. I don't understand what the market is anticipating. I do not see 2011 as being a good year. The US treasury market is in a bubble, China is experiencing a real estate bubble, the labor market is not recuperating, and the Fed is about to start another round of easing by buying government bonds.



Does any of the above sound like a recipe for a buoyant stock market? I don't think so. I can't think of a single reason why stocks should continue to perform well. Well, what about the earnings?



JPM and AA reported earnings this week and were in line with expectations. As I type this AAPL has hit a new 52 WH. GOOG has just reported earnings and the stock is up nearly 10% after market. NFLX is just off its 52 WH. All three of these stocks have not been in my portfolio in the last 12 months. In general, these companies have done well on the bottom line. But are they reflective of the overall stock market? Perhaps they are and people are laughing their way to the bank as I write this blog.



But when I put my glasses on I do not see anything that remotely resembles signs of optimism. Cheap money is what is driving today's economy. And when money is cheap strange things happen. I think we are in the midst of the last sprint before the proverbial falling off a cliff. The same mistakes that were made at the burst of the dot com bubble are being made now. Except that now we have no new wars to stimulate the economy, no new tax cuts, no housing market to generate jobs and riches, and no breakthrough technology.



Furthermore the geopolitical tensions in the middle east are simmering. There is a high likelihood of another military incursion taking place which may embroil powerful nations putting further strains on the oil supply and ultimately leading higher oil. That is without taking into account the continued slide of the dollar because of the continued money printing by the Fed.



So where are the good news? Where are the bright spots? Perhaps this is the story of two Americas. The employed and the unemployed. Perhaps I am projecting my own fear into the investment landscape. But I just do not see what will move the economy forward. Where is the growth going to come from? I do not see it, which is why I sold off the portfolio.