Worry About the Right Things

 | Mar 04, 2014 | 11:30 AM EST
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"Today is the tomorrow we worried about yesterday." --Anonymous

Global markets sold off Monday on the troubles in the Ukraine. Now it appears the markets will make up yesterday's losses, and then some, judging by Tuesday's equities futures, as Russian President Vladimir Putin has eased tensions a bit with his recent comments. Being fascinated by history, I have been transfixed by these developments.

But the turmoil does not change my investment outlook or strategy one iota. It has made me slightly more grateful that I own ConocoPhillips (COP) rather than Exxon Mobil (XOM) or Chevron (CVX). Conoco has been selling off non-core overseas assets and focusing on growing production in North America, where it has allocated 60% of its capital budget. On days like Monday, a lower geopolitical risk profile is much appreciated. The 4.2% dividend yield is also reassuring.

The truth is that Ukraine is not and should not be a significant worry for U.S.-focused investors. I will use dips caused by any additional turmoil to add to my core portfolio at slightly lower levels; and, yes, I don't think this is the last hiccup the markets will experience because of Ukraine.

If I were a European focused-investor, greater concern would be justified. Europe has been focused on growing renewable and solar capacity over the past decade. The continent has not embraced fracking and other new drilling technologies. Recently, it has started the process, especially in Germany, of eventually closing nuclear facilities.

As a result, the Continent is very dependent on outside sources for the oil and gas it still needs to power its economy. Russia is a huge supplier of these energy sources, especially natural gas. The eurozone also does much more trade with Russia and Ukraine than does the U.S. Thus, the Continent is more vulnerable to volatility caused by Russia's posturing.

The situation in the U.S. is completely different. Natural gas prices are a third of those in Europe. Thanks to the huge energy boom over the past half dozen years, the country is marching towards energy independence and still flares off a significant amount of natural gas production. On the bright side, maybe the recent demonstrated vulnerability of Europe to Russia's natural gas supplies will accelerate support for building the infrastructure necessary to export some of our natural gas bounty.

U.S. investors should be more focused on things worth worrying about as they relate to their U.S. investments. One such thing is the monthly jobs report that comes out this Friday. The market has been treated to two dismal jobs reports to begin the year. A third disappointing reading will not be the "charm" as it will be hard to blame the horrid weather across most of the country this winter for a third bad result in a row.

I agree with Jim Cramer, who recently opined that a third bad report cannot be dismissed and will signal a significant slowdown. My view all year has been that the economy would not be able to maintain the more than 3% GDP growth delivered in the back half of 2013.

I am now positioned more toward the low-beta and high-yield sectors, such as real estate investment trusts (REITs) that do well when interest rates decline, which they have done throughout 2014 so far. Monday's "flight to quality" triggered by the Ukraine situation caused rates to decline a bit more, and my overall portfolio was up slightly even as the market posted decent losses.

Investors will always have concerns about the market, and they rightly should; however, if one is to worry, it should at least be about the right things.

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