A Chance to Reposition

 | Aug 23, 2011 | 6:49 AM EDT
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Just looking for signs of what I am now calling "the way out," meaning the end of the crisis that either takes us to the Great Recession II or devolves into P/E multiple shrinkage and catastrophic earnings declines for many companies we trade and own.

Today we have one. At least for the moment. The decline in gold. This, above all, is a necessary precursor of any "way out" because it has correctly forecast the incredible decline in values we have seen since the realization that Europe can't be contained and our economy is slowing while our expenses of running the country are increasing.

I have a "see you in September" approach, meaning that nothing serious can occur on a policy level -- not a stock level but a policy level -- until the leaders return from their ill-timed vacations. But it is gratifying to see gold go down on what looks like, for the moment, might be a non-margin-hike reversal.

(Because I have to guard my words carefully: If you do not own any SPDR Gold (GLD), you have to buy some on the way down, but if you have more than 20% of your assets in gold, trim right back to 20% here to eliminate that high-quality problem.)

All that said, I hate up openings, especially with oil reversing back upward as it looks like chaos is descending in Libya and the allies have no plan for helping the rebels run the country. That's unfortunate, because Weatherford (WFT) said last night that Libyan facilities are remarkably intact, something I contended all day here yesterday.

What to do? We only have gold to hang our hat on. And we have the obvious short-covering rally ahead of Jackson Hole that we thought we had yesterday but was blunted at the end of the day by rumors of bank runs that could not be pinned down -- as I said, this is a horrible time for the market.

But, that said, it is better than nothing. Another chance to -- gingerly -- reposition to the stocks with accidental high yields that can protect you from the lock-step accelerated down moves that high-frequency trading and 2x-3x ETFs give you. Take advantage of their removal of their offerings at the opening and start your repositioning and bet that they have to sell off because all up openings have been pretty lame. Maybe this one's different.


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