The Only Game in Town

 | Dec 09, 2011 | 6:55 AM EST
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Crisis avoided?

No, just a continuing crisis with no step up in urgency, short term.

The question for most of us here is if we know that things are going to get bad but the market says things are OK right now, do you just say, "OK, fine, I will keep playing?"

I think a truly disciplined player with lots of capital just says, "OK, Germany is trying to smoke out some big pockets, like the Chinese or the Americans, and get something going. That will most likely fail but in the interim, things will play out."

And then when things are done playing out, the Italian bond yields soar, we get a really bad downturn in the European economy, and the Italian banks plus some of the German and French banks fail, so it is worth avoiding anything good that can happen short term.

Under that philosophy, you should sell right into this strength and forget about this market.

I have been trying to split the difference, being hypersensitive to the hazards, protecting homegamers with ideas that have plenty of yield and protection and are domestic and avoiding the interacting stocks. Downside -- as we are reminded yesterday, you can still give up gobs of percentages waiting for a snapback.

You just lose less than others. So I totally get the idea of saying, "They failed to solve the longer-term issues even as they put more money up to try to kick the can down the road for the fifth time, so I am leaving this casino."

But losing less on the down days, picking up some yield on the days of no consequence and making some money with domestic plays on the good days is still better than cash, which is something that's been proved pretty much empirically if you consider, for example, how the Dow Jones Industrial Average has done in 2011.

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