I hope everyone had a nice Easter and spring break. I have been getting several questions about the market, and I wanted to pass along a few thoughts.
If you have been keeping tabs on my predictions, you can see that we have been pretty accurate in our assessment of the economy and the market. 15 months ago I warned about oil and the effects it would eventually have on the economy. For several months I have been telling you that we have inflation while the financial media has been reporting there was no inflation. Now the cats out of the bag as Alan Greenspan said the Fed is finally becoming concerned about inflation.
Since it does no good to use the "liar, liar pants on fire" saying when it comes to economic reports released by the government, we have to take defensive measures whenever situations warrant. As you browse through "John's Journal", you will see that we favor a reduction of cyclical stocks, and increased exposure of defensive stocks. We will also be raising cash positions to take advantage of higher interest rates over the next 6-12 months.
Personally, I plan to be at least 50% in cash. I do not feel we are in a new bull market, but are experiencing a rally within an existing bear market. After an initial bear market rally, the market averages usually revisit their prior lows. In this case, it would be the lows we saw in 2002.
Use the Q2 rally to begin taking cyclical chips off the table. I have no problem with owning defensive stocks like Coca-Cola (KO). I have also got my eye on Anheuser Busch (BUD). When the economy begins to head south people begin to worry and drink more beer. I have heard the arguement that more people are gravitating toward liquor and wine. That may be true when they have money to blow, but when times get tough, nothing is cheaper than a 12 pack.
