Navigating Rough Seas.

May 14, 2012

Stocks sank for a second week. Concerns emanated from the U.S. and Europe, where slowing growth and debt issues continue to haunt us like Rod Blagojevich did the state of Illinois. He left the governor's mansion, but he remained omnipresent.
Europeans have begun to question the very idea of austerity, having recently awarded political gains to anti-austerity candidates (um, socialists) in multiple countries.
How many socialists does it take to screw in a light bulb? Two. One to screw in the light bulb. And another one to screw everyone else.
The last stop at the end of the gravy train is never pretty.
Domestically, tech and banking bellwethers Cisco Systems and JP Morgan poured gas upon the flames. Cisco, through a poor earnings report. JP Morgan by the revelation of a large trading loss.
Of course, no negative week is complete without a healthy serving of Greek Salad. Amid rumors that political paralysis may force Greece to depart the eurozone, investors got an unwanted helping.
Chinese economic data came in worse than expected, leading many to believe that one of the world's primary growth drivers may slow.
My grandparents never feared a slowing of the Chinese economy. Of course, my grandparents shared a car and ate liver and onions.
Tit for tat, people.
Technical indicators have officially turned bearish. Likely to remain so through the end of the month. Yet, not all sectors are moving in a chaotic lockstep typically reminiscent of market chaos (think 2008). This tells us that markets could just be consolidating Q1 gains, not falling apart.
Q1's leaders have been those most rapidly declining. Technology. Financials. And as is typical, not everything makes sense at the time. While the consumer staples index has held up (people always need soap, aspirin and razors), so the home builders and consumer discretionary indexes continue to outperform.
Real estate investment trusts represent another attractive space. Continuing to skip up the 50-day moving average. These investment companies pay nice dividends, provide growth, and have added a nice lack of correlation to stocks and bonds since the market began to decline.
Still, the market has wind in its sails. In fact, Bernanke's quite the blow hard. Record-low interest rates. A highly accommodative fed. Low inflation.
All of these provide a a safety net. A put contract beneath markets.
Speaking of puts, it was this time last year when the market began to really put it to investors, dropping 12% between May and October. Those losses remain fresh in investors' minds.
So, what does one do with so much uncertainty?
Well, a good financial advisor is like a sailor. His job is to navigate the waters on behalf of clients. Sometimes seas are calm. Other times, rough.
Like an accomplished sailor, a good advisor understands the sea. Its tidal currents. Lunar cycles. He can read nautical charts. Use a compass. A sextant. Chronometers.
An experienced sailor knows his ship. How to fix it. Bail water. Lighten the load. He understands when one must ride out the storm, and when to out run it.
Experienced financial advisors, like accomplished sailors, have seen tempests before. Ridden the swells. Rolled violently. And returned safely back to port - more experienced and effective for having done so.
He appreciates the power of the sea. Realizes that he must brave the rough to arrive at the calm.
There remain storms ahead. Rough seas to navigate in route to calmer waters. We cannot avoid them all. Yet, we will plot a course and endeavor to pilot the ship, crew and cargo safely back to port.
According to Seneca, "If one does not know to which port one is sailing, no wind is favorable."
Well, we cannot always control our direction, yet we certainly know the direction in which we're headed.

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