Europe Still Casts a Long Shadow

 | Oct 06, 2011 | 5:49 PM EDT
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Market has a mind of its own. A European mind. One thing has changed, though. Now it seems that when nothing happens in Europe, we actually do focus on anything that is good, such as the railcar numbers that Warren Buffett is talking about or the strong sales from individual retailers.

Sometimes you can gauge market sentiment from looking at sites like Twitter. It is often painful, because you do tend to get people who want to act as if there is no history. Today a couple of guys were bashing me for my negativity over the banks. It made me laugh, because until yesterday, that was a pretty darned good move. If I had been positive on them all the way down, it would have been hideous. Now I am foolish for not telling people to be in them?

A few days ago, I was being pilloried for saying that you shouldn't pull your money out of Morgan Stanley (MS). Now I am pilloried for not recommending it?

Who is that good?

No one.

So far, anytime you have believed in Europe getting its act together, it's been wrong. Anytime. That's an amazingly bad record. Those who have believed in it and have bought the banks stocks all the way down have destroyed an immense amount of capital.

Therefore, on no news, you can see them bouncing. But again, I caution, what is happening is systemic risk is coming off the table. Not earnings risk. Systemic risk. If you want to own a bank in that situation, go buy something that is not handicapped by the big national issues. Go buy U.S. Bancorp (USB) or Huntington Bancorp (HBAN), as my friend and colleague Matt Horween has been doing.

Otherwise, if you think that Europe's not going belly-up, there are a ton of ways to make money, of which my favorites are the seasonably strong tech names and the higher-yielding industrials.

They don't need Europe to do well. They just need it to do nothing. That's a better risk/reward.



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