The Daily Dose: Investing Around the Absurdity

 | Sep 30, 2013 | 11:00 AM EDT
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In my next life, I would like to return as one of the following: a high-end sushi restaurant owner, an owner of 500 Dunkin (DNKN) Donuts locations or a high-powered political analyst. Nowadays, my job in this life -- the role of Chief Nest Egg Steward -- generally entails requires political handicapping (if I don't buy and hold forever, that is). This is really a drag, considering the mountains of other things that a person has to address in the investment selection process, like a 24-hours news cycle that's preoccupied with Apple (AAPL) and Google (GOOG) devices.

With regard to the current state of ridiculous affairs, the outcome is truly anybody's guess. But when it comes to investing, I never hide -- I always have to seek profits -- so I have investigated the positions of each party, scribbling tree diagrams on what would be the best place to profit during an extended government shutdown. The more I do this, the more I realize that the wise-owl course of action would be to assume a long-term posture.

Normally, using investment jargon such as "long-term approach" is not in my style. Actually, it's banned in the office. It's beyond vague, and it's an indirect way of talking down to clients, which is a no-go in my business of trust-building. But, in this case, I can place a time horizon on the "long-term" -- pondering how third-quarter earnings season progressively unfolds. So I suggest jumping outside of the government-upheaval concerns and a market that has, in response to this, fallen in six of the last seven sessions.

Here are few reminders on what should soon present itself for long-term consideration.

1. The third quarter is in the books for companies other than retailers (whose quarter ends October), meaning this period has escaped immediate government-shutdown impacts. That quarter is likely to showcase, once again, challenging top lines -- unless you're talking about a company with the internal growth characteristics of a name like Nike (NKE).

2. For any company with a modicum of business leveraged to the government, and with earnings due before Oct. 17, expect overly cautious fourth-quarter guidance and 2014 commentary.

3. The longer a government shutdown lasts, the longer the market will brush off prospects of the Federal Reserve tapering stimulus. I think this is being seen in the rush into the 10-year U.S. Treasury bond, as opposed to it representing a flight-to-safety bid. (The dogs at the S&P lurk.)

4. The friendliest plea to invest, oddly, continues to be Europe. The price-to-book ratio on the Stoxx Europe 600 clocks in at a mere 1.7x vs. the S&P 500 at 2.5x -- and the former seems to offer better relative value, given improving macroeconomic reads and Angela Merkel's reelection as German chancellor.

An Update on J.C. Penney

First off, please read this. I do not jerk around on stock calls, and I am decisive when zillions of hours of research suggest certain outcomes. My J.C. Penney (JCP) call is no exception.

In that vein, this past weekend I went on the prowl for signs that J.C. Penney, the stock-market story, was starting to appear in the company's real-life-store story. I was chiefly looking for the smell of fear among internal planners, going by visual cues. For the first time in this year-plus ordeal, I found just that -- and this is disturbing.

Listen, I don't care what firm says in the next few weeks, nor about analysts pounding the table on J.C. Penney as a screaming, undervalued buy. You are not to buy this stock. You shouldn't even try to trade J.C. Penney. Put your ego aside, and forget the stock exists on public exchanges.

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