Current Market Offers Little Reason to Buy

It’s a nearly impossible situation. If your money manager is loading up on stocks right now, you’d probably think he’s a certified idiot. Yet if he indicates he’s only sitting on a pile of cash, you might be wondering what in the heck you’re paying him for, anyway.

The answer isn’t black or white, but a slightly uncomfortable shade of gray. Now isn’t simply a time to take risks but to take the right risks.

And the right type of risks. I know there are more than a few people out there who swear buying Ford Motor (F) at $2.15 and selling it at $2.75 a few hours later is a shrewd maneuver. That sort of trading, I mean “active investing,” I’ve simply never had much luck with.

Perhaps you are sick of hearing about (or thinking about) the politics of the moment. So forget about the politics of the moment and focus on something else. Are there an abundance of long ideas working in the stock market as of late? Are there comprehensive sectors or countries in bull markets that I don’t see?

Time Magazine, 10/13/08

For the bulls, the best thing about the stock market right now is just how bad it is. The VIX, or so-called fear index, has spiked to historic levels. And given the almost continuous flow of recession talk, there's no question the markets and weak economy have become front-page news.

CBOE Volatility Index (VIX), 3-year

I believe that the long term starts in the here and now. Yet beyond a countertrend rally, I’m not sure it’s terribly bullish when the only bullish thing you can say about stocks is that virtually none of them are doing well.

I’m actually long some equities, such as Mitsubishi UFJ Financial Group (MTU), the world’s second-largest bank holding company with about $1.2 trillion in assets. But so far I haven't seen the sustained price action that would convince me a legitimate bull move -- and not a dead-cat bounce -- is underway.

Until I do I'd recommend sticking to your circle of competence, as Warren Buffett likes to say. Right now, my circle of competence includes brushing my teeth and staying out of trouble.

Shareholders of Trump Entertainment Resorts (TRMP) might consider firing Donald Trump, the chairman of the board. The company, which owns and operates three casino resorts, slumped to an all-time low of 57 cents on Thursday, down 93% over the past 52 weeks. It was a $15 stock in 2007.

In The Donald’s defense, the entire sector has cratered amid an abundance of debt and decline of business. Yet among the big casino operators only Trump Entertainment has descended into penny-stock purgatory.

Trump Entertainment Resorts (TRMP) vs. MGM, LVS, WYNN - YTD