The tea leaves say 'sell,' portfolio manager says

Oct 30, 2011 @ 12:01 am

By Lavonne Kuykendall

Frank A. Barbera Jr., co-portfolio manager of the Sierra Core Retirement Fund, tracks a staggering number of jobs reports and other economic indicators.

They all say the same thing, he said.

“We have been seeing "sell' signals since August,” he said last Tuesday at the National Association of Personal Financial Advisors' Practice Management & Investments Conference in Brooklyn, N.Y.

Mr. Barbera's Sierra Core Retirement Fund Ticker:(SIRAX), which has $750 million in assets, has been reducing its exposure to equities and shifting to cash.

Under certain conditions, “we have the ability to go to 100% cash,” he said.

October has been a good month for the S&P 500, but Mr. Barbera suggested that equity markets can be misleading.

“Equity markets are quick to jump; they react to hope and fear,” he said.

“If you want a good story, look at the credit markets. They have not improved at all in the last six weeks,” Mr. Barbera said.

His advice for financial advisers is to “be careful about putting risk on right now.”

Mr. Barbera recommends reducing equity holdings and investing in U.S. Treasuries and triple-A-rated corporate debt.

He thinks that the euro is overvalued and a bad investment.

Mr. Barbera is concerned about the U.S. economy and eurozone banks, and said that we haven't seen the worst of either one yet.

“Our contention is that there was no recovery. We had a leveling off, but not a recovery,” Mr. Barbera said.

And now indicators are heading down again, suggesting another recession, and not a mild one, either, he said.

As for Europe, the debt crisis that used to be “peripheral” is threatening the entire European Union, Mr. Barbera said.

“It used to be Greece, and now it is Italy and Spain,” he said.

“They are too big to fail and too big to bail,” Mr. Barbera said.

He thinks that the credit problems will affect French banks and eventually perhaps drive Germany to abandon the euro and go back to the Deutsche mark as its currency.

The crisis in Europe “is in the second or third inning,” Mr. Barbera said. “It has a long way to go.”

Email Lavonne Kuykendall at lkuykendall@investmentnews.com

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