Time For A Second Cup

One reader asked for my two cents on the homebuilder stocks noting that Cramer is bullish. I don't know first hand what Cramer's opinion is. I have written a few times about this group. This is and has been a blind spot for me. I do not quite understand how there can be unlimited demand for new houses. Every investor has blind spots-this is one of mine.

That being said, at a minimum there is plenty of debate about magnitude of the current economic slowing underway. If you acknowledge there is a debate about slowing, that would seem to create a big head wind for the group.

Another reader is in a dilemma about how much cash to have on hand. He believes that he will be able to buy things he likes at better prices. He could be right but no one can know obviously. The answer is subjective but there is a difference between raising some cash and missing the market. The reader mentions high yielding stocks and the like as a means of taking down the volatility. When I implement a new account clients often ask about how to get started, what if the market drops quickly? If you buy ten different stocks today, one from each sector, chances are a few of the entry points will look great, some will look lousy and some won't matter. Further it is very unlikely that you could guess ahead of time which would be which.

Trying to get too aggressive with cash (like 50% or more) is going to be really wrong that vast majority of the time.

Another reader asks for specific answers about how to invest in frontier markets. I linked to a Barron's article that had some OEFs that provide some exposure. There are some closed end fund-like products that trade in London, in US dollars, that invest in some of these countries. TrustNet is a site that is a good resource for these funds.

The same reader also notes that he can understand anyone being frustrated because I have been too negative this year and by my own admission am having a bad year. Hmm not exactly right. Too negative this summer; yes. Bad year; not quite. I had a big spread over the benchmark that evaporated to now being about even. As RW graciously noted that's not bad. Equaling the market, getting a big call wrong, with a lot of cash is not a bad year. I was on my way to a much better year to be sure but an incorrect decision does not necessarily mean the year is bad.