It is a difficult year

On January 31, I expressed my opinion on this blog that from an investment viewpoint this will be a difficult year.  Well, we are six months into the year and it has been difficult.  I expect things may get worse.

I am now holding 1) cash, 2) gold and gold related stocks, 3) a few boring dividend bearing stocks (telephone companies), and some PIMCO bond funds.  I have sold my beloved growth stocks (Apple and Google).  I have purchased a few puts expiring in January.  On days when the market goes down, the puts go up leaving me even about for the day.  If this continues I will net the dividend income for the year but no overall capital gains.

Why do I think the investment outlook will continue to be difficult?  First of all, stocks in general are fully valued.  Second the economy has not recovered fully and the rate of recovery has slowed.  Congress has decided to stop stimulating the economy to enhance recovery.  This reminds me of the 1970s.  We are trapped in a war that is draining our resources with no end in sight.  People have lost faith in government.  There is a feeling that our day in the sun has passed and that the Chinese will take the leadership of the world economy.  The whole national mood is gloomy.

(For those of you that don't remember, in the 70s we thought the Japanese were taking over the world economy.  Companies were trying to copy Japanese business methods.  However, today I don't notice any companies trying to copy Chinese business methods.)