Bolling: Nowhere to Run

Can't Come Out and Play

Commodities are contracting, equities are falling and surefire "safe havens" aren't safe. Case in point -- gold has been on a losing streak in an environment that should be extremely friendly to the metal. There are no real places I would invest my sons money, so I will not recommend any here. Not yet.

There will be a trade, a time when things sort themselves out, but be wary of recommendations in a really ugly market. This is as ugly as they get -- be warned. Stay nimble, stay in cash.

Cut Losses; Pare Down

My portfolio has been trimmed down dramatically. I took as much risk off the table as possible. Three weeks ago, I thought mid-cap stocks might be bottoming, so I started to buy SPDR Mid Cap 400 (MDY Quote), the ETF that tracks mid-cap stocks.

As the financial crisis evolved and Washington began spinning, I took a fast loss and am better off for doing so.

I also cut losses on Energy Select SPDR (XLE Quote). I closed out most of my energy exposure and remain very light there. I still have, although limited, exposure to homebuilders and financial's. The portfolio is pared down to about 5% equities.

Bet on a Happy Ending

I mentioned in an earlier column and on TV that I have moved much of the portfolio into three-month Treasuries at 80 basis points. It is unbelievable that a three-month T-Bill fetches only 80 basis points! And, for the first time in many years, I returned to the muni bond market with a purchase of a New Jersey bond insured by the new Warren Buffett entity that insures high-quality municipal bonds.

Scared? Perhaps, but when my 10-year-old son asks whether everything is going to be OK, I need to be able to look him in the eye and answer honestly: Yes, it will be OK again. In the meantime, preserve capital and play defense.

There will be trading opportunities in the future. Many great trading opportunities lie ahead, but for now, the best trade is no trade.

Trade with your head, not over it.