I have been following this approach for two years, though I must say, I got stuck in some “value traps” the past 18 months, as I tried to maximize my dividend yields on my portfolio. Specifically, the funds I bought in 2007 were closet “financial” funds, though they did not own the most toxic mortgage company stocks. But they did own some of the big banks and brokerage stocks, and those were hammered last fall, as we all know.

I also was heavy into energy and commodities, which did great while the financials were falling, up until last July, then Boom, I lost more on the commodity stocks, on paper, than on the financials. But, I am still in those stocks as I believe it is a temporary phenomenon and within 3 years, commodities will take off with global inflation. But not until the global economy recovers. It is nearly impossible to get global inflation with weak economies. There is just too much productive capacity (aka excess supply) for prices to go up.

So, trading high beta names, like some of the better quality financials and techs, is the way to get some type of gain before inflation comes back.

It is much more likely that we will in fact “retest the lows” though that may mean SP500 of 750, not necessarily 670. The summer is a likely time for that retest because it is traditionally a slow / weak market period. But by October and the 4th quarter, there is a growing consensus among economists and business planners, the economy will begin growing once again. The market will move in front of that growth, so there is not much more time for the bears.

As for the case for gold in the next year or two, it doesn’t look good. The panic trade is gone, and it will be some time before “reflation” turns to Inflation.

Be a buyer in the stock market on the dips. It is looking like Tech may lead, as it has since January.