Worst to First

This rally has been fueled by the companies that got hit the hardest in the downturn, that is, the most cyclical companies and the most debt-laden companies. Yes, the “strong” companies did not get hit as hard when things turned south (and many of these “strong” companies were consumer staples companies), but these same companies have yet to bounce with the rest of the market. Looking forward, the upside for these highly-levered companies relies heavily on many quarters of robust economic growth and I just do not see that happening. We have way too many big picture issues to sort out before we can move higher (i.e. healthcare reform, bank regulation/standards, energy independence, national debt burden, etc.). I am looking to buy dividend-paying companies with strong balance sheets, such as Proctor & Gamble, Bristol-Myers Squibb, and PepsiCo.

Is Employment a "Green Shoot?"

I am still a little torn on the unemployment situation in America and some consumer spending habits. Yes, nearly 10% of Americans are officially unemployed (really it is about 17%), but I feel like the other 90% might be okay. This is my one “green shoot” for future growth as consumers account for about 70% of our gross domestic product. If you still have your job and your dividend paying stocks are still handing out cash, not much has changed for you other than the value of principal in your account is lower. Look at Apple's latest quarter...someone is still buying iPhones hand over fist! I am not sure if Apple is an anomaly or an indicator that the top 90% are better than most think (it also helps that Apple is part of a huge move toward mobile internet).

Unemployment data is a numbers game and the media often distorts it. If unemployment goes from 5% to 10%, we say it has doubled or gone up 100%. At the same time, though, the employment rate goes from 95% to 90% -- only a 5.3% decrease! Everyone knows job losses have slowed, so it is not really news. The big issue is job creation and when will it occur.

The Charts Can Lie

When people say you need to buy stocks because you do not want to miss the move or because prices are trending higher...WATCH OUT! For a trader, this is heaven, for a long-term, buy-and-hold investor like most Americans, UH OH! The average, everyday investor is the one who buys at the top and gets burned. I am not saying we will test the March lows again (mostly likely that will be the low for years to come), but the potential for upside in stocks is very, very limited given what available information we have. Yes, businesses are poised for ridiculous bottom-line growth given they have been stripped down to almost nothing, but ultimately, the top line drives the bottom line. Top line growth prospects are not on my radar screen given tepid consumer spending. The only sector that has some nice growth prospects is the technology sector, especially the mobile internet companies (some alternative energy companies might be sitting pretty, but they are too speculative/the government has too much influence for my liking right now), but these stocks are already trading at very high multiples.