If you can keep your head about you when everyone else is losing theirs, well then, you must not be watching CNBC! I can’t blame cable news entirely for Wednesday’s 279-point drubbing on the Dow. But the drumbeat of instant financial news (magnified by the Internet) is clearly having an effect, prompting more and more investors to make emotionally driven, shortsighted and ultimately self-destructive decisions.
For example, just a couple of months ago, CNBC (and other news outlets) were splashing the lovely face of PIMCO’s Bill Gross on their screens. Seated on his Paul Revere hobbyhorse, Gross sounded the alarm for all and sundry to dump Treasury bonds. It was even reported that PIMCO, the world’s largest bond manager, was selling T-bonds short.
Squirting gasoline on their own fire, the arsonists in the electronic media regaled us with preachments from Warren Buffett and Jimmy Rogers — get rid of those bonds! And then, of course, they trotted out dear, dear Meredith Whitney to condemn municipal bonds, again, even though her prediction (on “60 Minutes”) of an epidemic of defaults is proving (at the very least) woefully premature.
The result?
Over the past three months, bond prices have staged one of the most powerful rallies in recent years. Typical long-dated Treasury has gained 11% from its February low, not counting interest coupons. Municipal prices have recovered the great bulk of what they had lost in the November-January rout.
Sad to say, millions of investors who listened to the pied pipers of the media missed out on these profits (or worse, locked in losses by selling when bond prices hovered near their winter lows).
For those of us who kept the faith and bought bonds, as I advised, the next task will be a happy one: to harvest our profits at the appropriate point. If, as I expect, the stock market backpedals a bit further in June, our sell signal will likely be triggered.
Moving on to stocks, Wednesday’s tumble put us back on a buy signal for conservative mutual funds like FMI Large Cap (MF: FMIHX) and Gabelli Equity Income (MF: GABEX). I’m also warming to a wider selection of individual stocks, including India’s Tata Motors (NYSE: TTM) (see related article).
TTM has begun exporting its tiny, ultra-cheap Nano to neighboring Sri Lanka, the Nano’s first foreign market. The firm has sold 110,000 Nanos since the vehicle first went on sale in April 2009. Over time, I think the Nano will help introduce the Tata brand to many other developing countries, giving TTM the name recognition it needs to build a truly global business.
