Last week was a positive week for the markets, celebrating with a 140 point rally early Friday on better than expected employment figures. Interestingly, by the end of the day massive selling took the gains away as if to suggest that market participants don’t believe the numbers. I don’t beleive them either.

Meanwhile, the Obama administration pitched that this was the best report since 2007. Don’t get me wrong, any good news on employment is great with me. I’m just not confident that the whole story is being told. I have read estimates that put real unemployment rates at 21 percent. Of course these estimates include workers who are underemployed or have just given up looking for a job.

If I lost my job as an investment advisor and took a job as a sales clerk in a retail shop, I would be underemployed and would want to be counted in the report.

Could We Learn a Lesson from Wiley?

Remember when Wiley Coyotte would chase  Roadrunner off the edge of a cliff? There was always that awkward passage of time as he sheepishly tip-toed back to the edge only to plunge to the valley below. Recently, I have heard our economy’s current state described using this cartoon from our childhood. Why is it that Wiley never has a parachute?

It is likely that our economy will experience a double dip recession and investment portfolios should recognize this potential. As we enjoy this record recovery in securities prices, one cannot help but think what will happen if the economy slips into recession again. Now is the time to have your strategy in place.

Meredith Whitney, the bank analyst who predicted last year’s collapse of the credit markets was quoted in the financial press today as being more bearish now than at any point in the last year. I agree.

That being said, we’ll enjoy this bear market rally while it lasts; always with an eye for the door though.

“Aint it great” is a phrase I remember hearing as a child. You see, I had family members who were active Amway distributors. I have fond memories of listening in on meetings in which the presenter drew lots of charts and circles, explaining how everyone could “live on Easy Street” if they would embrace the Am Way. I for one never quite understood the charts and circles but it didn’t matter because all of the grown-ups kept saying “Aint it Great!”

Investors I guess feel the same way these days. Can’t figure out why the market keeps rising but …. “Aint in Great!” Frankly, stock fundamentals stink but the charts look terrific. Market technicians, those brainy folks who track market momentum and investor emotion, are creating charts and drawing circles. Many of them see opportunity as cash re-enters the market from the sidelines.

That being said, when the trend reverses, be prepared for a significant market correction. We have a strategy to protect protfolio values. Do you?

Investors who have been “long” this summer have enjoyed an historic recovery of market values. Now it looks like the rally may be losing steam. Hoxton Financial is watching market action very closely and is prepared to protect client assets when the reality of this economy, the credit crunch and fragile investor emotion whistle for the bear again. Can you hear it? “Here bear bear bear.” Now is the time to prepare.

Do you have a plan? What is your sell discipline?

I know this is driving the analysts crazy. The market pundits are losing their minds. The market shouldn’t keep breaking new highs; not with headlines proclaiming the end of the recession. Or should it? The Dow is up more than 4000 points since its most recent low in March.

The driver is the same as as it always is….investor emotion. While at this time last year the dominant emotion was panic, this time its panic….too! There is a tremendous amount of pressure to be invested right now. As long as the fear of missing the greatest one year run in history mounts, investors will pour money into stocks. Is this wise? Sure it is as long as you know when to lock in gains and get out of the way of the sneaky bear.

Question: Do you have a sell discipline? Is it based on your “gut” or something measurable?

I really hate to continually blog about dishonest financial advisors but it seems that we are surrounded by them. I spent the better part of today meeting with hard working business owners who fell victim to the sinister designs of their longtime tax advisor. What makes a successful, highly regarded and trusted advisor turn to the dark side? It can’t just be about money…. Can it?