Abandon All Hope...and Go Long

Giving up is a new beginning. Letting go. Flushing it out. Or just, simply, shrugging and walking away from it. It could be a job, a crappy relationship, a business, a sports team, a government leader, or an investment. Investors are probably a little past that point now. Stifel Nicolaus macro strategist (and all round neat guy) Barry Bannister poses that bear markets end and bull markets begin with investor disdain for equities.

I spent a few days last week meeting with fund managers, analysts, and other gurus. This was the takeaway from listening to a handful of money managers was this: “Bonds…bonds…not Treasury bonds…but corporate…high yield..some emerging market debt…and…oh…I don’t know…gosh…it make me nervous but..umm…OK…stocks…maybe…but only if they pay dividends.” The rhetoric doesn’t get more chickenshit than that.

I listen to an impassioned Dr. David Kelly, J.P. Morgan’s chief U.S. strategist tell a room full of the doubtful hopeful that investors just need to grow up and buy some dividend paying stocks. There was also a general consensus among the parade of experts that leadership in Washington at both the executive and legislative level was ineffective and absolutely useless. No faith whatsoever. And that’s a great sign. It is. Honestly.

So where do we go and what do we do? The S&P 500 sits at around 1210 give or take, about 3.7% down YTD. Not bad considering the smacking about it’s received since mid-year. My Spidey sense tells me we finish the year flat to slightly up. Things are just too weird (Europe, Washington, Europe…yes…so fucked up you have to say it twice) to let us bust completely loose. Don’t worry. Engine pressure is building and we will see some, as the reformed Broker author Joshua Brown would say, “face ripping” rallies in American stock markets. This is just too good of a place for good things not to happen.

So, Mr. or Ms. Investor, how do we position ourselves going into all of this? Again, the rational fear of uncertainty (in good times there’s an irrational lack of fear) still grips the mood, so the mega cap, blue chips that PAY YOU SOMETHING make the most sense. Still lovin’ my industrial trifecta of Dow Chemical (DOW), International Paper (IP) and DuPont (DD). Big technology ex- Apple (AAPL), Amazon (AMZN), and Google (GOOG) is intriguing with Microsoft (MSFT) trading so darn cheaply with so much cash. Intel (INTC) has bucked the trend and rocked like Keef Richards before his visit to the Swiss clinic of late. Speaking of drugs, Eli Lilly (LLY) and Glaxo Smith Kline (GSK) look pretty groovy. And from the oil patch (yes…a commodity) Conoco Phillips (COP) is the safety choice while Total (TOT) is a good play on the emerging and frontier markets.

The best part? All of these names pay you 3% or better just for showing up and signing in. These are huge companies with solid earnings. And they’re cheap. They won’t stay that way for long.

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