Perhaps, you may be wondering what happened to My Gut Feeling over the course of the last several trading days. Well, as it turns out, after leaving my offices on Wednesday February 26, I slipped on a patch of ice on the building steps, fell and took a blow to the side of my head. At this point you can take a few seconds to come up with a joke or snarky remark about my head, brain, etc. Needless to say, after a visit to the emergency room, which resulted in a CT scan that revealed no damage, but did provide evidence of the presence of a brain, I was diagnosed with a mild concussion.
Doctors at the hospital as well as Dr. D, a leading neurologist and client told me to take it easy for several days. Dr. D was a bit more forceful and told me to shut it down; meaning abstinence from the computer, major stimulus and physical activity. So, for several days I kept in touch with the markets via Bloomberg TV and radio or by telephone with colleagues and brokers. However, as my wife explains to people, “Scott’s brain is usually processing at 120 miles per hour while the rest of the world is at 60. Now he is at 80 miles per hour.” After taking the advice of doctors, especially those of Dr. D. I was able to heal and by now I am back up to 100 mph and operating the computer, on a reasonable basis. I am not pushing myself to put in my typical 12 – 16 hour workday, as I do tire early. I also got clearance to fly and am resting up in Henderson, NV, outside of Las Vegas.
Investment Strategy: Risk Management not Overactive Panic
Interestingly enough, last Monday, the markets got spooked by the buildup of Russian troops in Crimea. The S&P 500 (SPX) dropped by 1.35% in the early part of the day, yet cut that decline to only 0.74% by the close. However, to me, this was just another rerun in TV Land of the Market Panic Show. As I explained on the day after the Boston Marathon terrorist attack last year, it was time to turn to risk management mode. Upon further analysis (recall that I was processing above the speed limit with my eyes closed) of the Putin actions and the reaction of other world leaders; no matter how toothless they might have been, made it clear to me that the situation in Ukraine was going to be a game of chess rather than a game of Battleship. So, the proper investment action to take was one of guarded alert, i.e. get ready to act if the Ukrainian situation boils over into a full-fledged conflict. However, it was not time to overreact and take immediate knee-jerk action. My experience in dealing with these exogenous events was correct; we remained fully invested and by Friday’s close, the SPX added 1% for the week and closed at an all-time high.
European Markets Will Suffer Most From Ukraine
I would hypothesize that Europe will feel the brunt of any economic consequences of the situation in Ukraine and exposure to Europe needs to be kept on a short leash. Currently, we hold positions in the Wisdom Tree Europe Small Cap Dividend ETF (DFE).
This weekend we had a stream of other events which took some of the media attention off of Putin and Ukraine. First, a Malaysia Airlines flight mysteriously disappeared near Vietnam in the Gulf of Thailand. Circumstantial evidence, because that is all that is available right now, is that this was a terrorist event. Also over the weekend, China reported weaker than expected trade data. Of course, the good news is that there were no new winter storms in the last few days in the north and northeast. I hate to disappoint you – one is on the way. I will enjoy it from the desert in Nevada where I cannot slip on ice and reinjure myself. .
Sold Ford Motors Bought Red Hat
Since I last penned My Gut Feeling, we eliminated all positions in Ford Motors (F) and used most of the cash proceeds to begin positions in Red Hat (RHT). I cannot promise that I will be up to the task of publishing My Gut Feeling every day in the next week (it takes typically over two hours from start to finish to produce and send out) but I will try my best.
Disclosure: At the time of this commentary Scott Rothbort, his family and/or clients of LakeView AssetManagement, LLC was long DFE and RHT — although positions can change at any time.
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Scott Rothbort is also the publisher of the LakeView Restaurant & Food Chain Report, a newsletter focusing in on food, restaurant and agricultural stocks. A subscription is included with a paid Platinum Membership to Wall Street All-Stars or an individual subscription to the newsletter which can be ordered at www.restaurantstox.com
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