I’m well aware of the difference between being early and wrong. As the old saying goes, there is none. I’ve attached a snapshot of Smart Money’s Map of the Market. As you can see the defensive sectors have sold off and financials, materials, energy are rallying. I don’t believe this is the correct longer term trade. Bernanke’s extraordinary admission of the country’s desperate financial health doesn’t make me think consumption and factory orders are going to quickly pick up. In fact just the opposite. By driving rates to zero and keeping them there ,it’s unlikely to foster what hasn’t worked for the last couple of years. What is working though is creating a bubble in consumer staples and utilities that can pay high dividends and raise them modestly. When the economy doesn’t respond or more likely as the earnings warnings start coming in, reality will also start to settle in. The bubble should continue on with renewed vigor. Don’t get me wrong. There is nothing wrong in investing in bubble as long as you know when to get out. And Bernanke has told us we don’t need to worry about getting out anytime soon.
