The tea leaves say 'sell,' according to this portfolio manager

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, speaking Tuesday at the National Association of Personal Financial Advisors' Practice Management & Investments Conference in Brooklyn. His Sierra Core Retirement Fund, 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. He sounded like it was a possibility. 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.” His advice for advisers: “Be careful about putting risk on right now.” His recommendation is to reduce equity holdings and invest in U.S. Treasuries and triple-A-rated corporate debt. He believes the euro is overvalued and a bad investment. Mr. Barbera is concerned about the U.S. economy and eurozone banks, and said 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,” he said. And now indicators are heading down again, suggesting another recession — and not a mild one, either, he said. As to Europe, the debt crisis that used to be “peripheral” is now threatening the entire European Union, he 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.” He believes 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,” he said. “It has a long way to go.”