Take Whatever the Market Is Giving You

The superior person can hold two contradictory thoughts simultaneously and still continue to function. You need a long-term vision combined with short-term focus.
-- Brian Tracy

I keep reading stories about how wonderful things are going for the economy -- home and car sales increasing, consumer sentiment jumping, inflation well under control and green shoots of recovery everywhere. Given how the stock market has been acting, a lot of folks are embracing these optimistic views.

The debate between those (like Jim Cramer) who think things really are rapidly improving and aren't fully reflected in the market. and those (like Doug Kass) who think the market has gotten ahead of itself is going to be the primary theme we read about for quite some time. No matter what side of the argument you agree with, the key thing is that you not let economic arguments blind you to the way that stocks are actually performing.

I have great concerns about the eventual repercussions of all the government involvement in the economy. Handing out money is something the government does well, but paying the bill down the road is going to be the big challenge. Although there are already growing fears of inflation and concerns about government intrusion into private business, the market isn't reflecting those worries at all. In fact, the market seems to be indicating that things are going to work out very well.

The easy thing to do is to be dogmatic and adopt either the extremely rosy view or the extremely pessimistic view. Most everyone has a strong opinion and is leaning one way or the other.

The most practical approach for investors is let the market be your guide to the economy. Right now the market is acting like the economy is going to be just fine. While we are a bit toppy in the short term, nothing in the technical action indicates anything other than blue skies and apple pies ahead of us. We have strong speculative action, a growing list of stocks hitting new highs, rising commodity prices and stocks making parabolic moves. You might not believe what this is indicating about the economy, but trying to fight it isn't going to make you much money in the near term.

At some point the indices are going to struggle and even lose some underlying support. At that point we can start worrying more about the validity of the views of the economic pessimists. I believe the market won't make it through the summer unscathed by a pretty severe pullback, but that is not today's business. Today's business is navigating a market that is still acting quite well.

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Know what you own: Tuesday's volume leaders include NovaGold (NG - commentary - Trade Now), Eldorado Gold (EGO - commentary - Trade Now), Central Fund of Canada (CEF - commentary - Trade Now), SPDR Trust (SPY - commentary - Trade Now), Prudential Financial (PRU - commentary - Trade Now), Aberdeen Asia-Pacific (FAX - commentary - Trade Now) and Imperial Oil (IMO - commentary - Trade Now).

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James "Rev Shark" DePorre is the author of Invest Like a Shark: How a Deaf Guy with No Job and Limited Capital made a Fortune Investing in the Stock Market. He is founder and CEO of Shark Asset Management, an investment management firm, and he also operates sharkinvesting.com, an interactive online community that serves and educates active investors. DePorre holds business and law degrees from the University of Michigan, is a member of the Michigan Bar Association and a former tax attorney and CPA. He lives in Anna Maria Island, Fla., with his wife and two children. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Rev Shark appreciates your feedback; click here.