NOTE: Every week or two I wrote a Client Note for my clients. I post most but not all of the notes to my blog but with a time delay usually between 1 day and 1 week. To receive the Client Notes at the same time as my clients, sign up in the box in the right hand corner of the website.
Those of you who have followed me over the years know that I was slow to warm to this bull market. However, in the last year I have evolved and come to embrace it. I stopped trying to short it (see “The Loser’s Strategy”, August 4, 2013) and decided to invest more in line with what is actually happening rather than with what I think should be happening.
As a result, my clients and I have had an excellent 8 months to start this year. My personal account – which is tracked by CoVestor – is up more than 20% and my clients are doing quite well too.
However, I am starting to get nervous again. The S&P recently tagged 2000 which marks a 200% advance from its March 2009 lows. 2000 is a number that I have targeted in recent Client Notes and hitting it has caused me to think about where we go from here.
One major concern is when the Fed starts raising interest rates. While many don’t think this will happen until mid-2015, another strong employment report this Friday could pull that time table forward, according to Russ Koesterich, Chief Investment Strategist at Blackrock. “If you get another strong employment number, that will focus investor attention on the impending monetary tightening. It could cause volatility in the fall”, Mr. Koesterich told The Wall Street Journal.
Doug Ramsey, Chief Investment Officer at Leuthold Group, is calling for a correction. “We are expecting and 8% to 10% correction for the S&P 500 over the next two months. There is a good chance that it would wipe out all the gains for the year”, he told The Wall Street Journal. (Both the Koesterich and Ramsey quotes are from “Strategists Brace For A Swoon”, Tuesday September 2, C1).
As a result, I have started trimming some positions. I sold our large position in Lifelock (LOCK) for a significant profit. I also cut our positions in JC Penney (JCP) and Apollo Group (APOL) in half. Should any other stocks reach my targets, I wouldn’t hesitate to raise even more cash.
This doesn’t mean that I am turning bearish. It just strikes me as a good time to raise a little cash when times are good and in case better opportunities present themselves down the road.
Founder & CEO
Top Gun Financial (www.topgunfp.com)
A Registered Investment Advisor
Bay Area, CA