Take the Money and Run, Part 2

This article was written with Oliver Pursche, the Co-Portfolio Manager of GMG Defense Beta Fund. It was part of a series of articles developed under an agreement with thestreet.com to work with a variety of contributors and assist them in delivering actionable investment ideas each week.

NEW YORK (TheStreet) — On Thursday I sounded some alarm bells when I suggested investors take the positive news from Europe, improving economic data in the U.S. and strong ADP report with a grain of salt and that they should become more cautious, not more bullish.

I have to admit, it was a gutsy move with the Dow Jones Industrial Average up some 240 points.

However, I’d like to take Friday’s unemployment data and Intel’s (INTC) revenue warning reiterate my worries and my advice: For those who can, take the money and run.

Markets aren’t selling off at the moment because investors believe a third round of quantitative easing is a certainty. Once again I must sound a warning — QE3 will do very little to help stocks. Buying bonds simply does not create jobs.

Moreover, earnings estimates, as I wrote Thursday, will likely come down some 20 to 25% from current levels. Lastly, so far this century the months following an election have tended to be somewhat erratic.

I’m not a fan of market timing and don’t proclaim to have a crystal ball. However, I do believe in data — and the data, both fundamental and macro-economic, is telling me trouble lies ahead.

Avoid broad market exposure such as owning the SPDR S&P 500 (SPY) exchange-traded fund and look to rebalance your portfolio towards companies with strong balance sheets and a solid dividend yield.

Some of my favorites are McDonald’s (MCD), Bell Canada (BCE), Southern Company (SO) — especially after the recent sell-off, and Johnson & Johnson (JNJ).

I also think that commodities ETFs like SPDR Gold Shares (GLD) and iShares Silver Trust (SLV) will fare well. Be careful of oil though, a potential release of the strategic reserve by President Obama — should he win — could put a damper on prices.

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