The Day of Reckoning Is Here, Rebalance Your Portfolio Now

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June 29, 2011 11:44am NYSE:EEM NYSE:SHY

When does a “soft patch” become a “stumbling recovery”? Apparently, 27 months into a post-recession rebound that’s looking fatigued. That’s not some sort of riddle or trick question, it’s actually the crux of the strategy that Michael Yoshikami, the CEO & Founder of YCMNet Advisors, is

utilizing right now to stay afloat in an admittedly tough environment.

The recovery “is not going to be a straight line up” Yoshikami tells Breakout. As opposed to pricing in an expected or hoped for 2nd half recovery and rally in stocks, he says you must invest as things are, not as you hope they’re going to be. “It’s prudent to adjust your strategy based on current conditions rather than hoping for a magic bullet,” he writes in a recent letter to clients. And to do that, given the current state of things, “you buy assets that are going to be resistant to the downside” such as stocks with very high cash flow and strong dividend policies, cash, commodities and short-term bonds.

“Be conservative, but get invested. Recognize that a long-term investment strategy is really made up of a series of short-term strategies strung together, and they have to factor in what’s happening in the world,” Yoshikami says.

So, we asked the California-based advisor with a Ph.D. in Education Research to explain why he ended his latest note with “the day of reckoning is here.”

“There’s something to be said for telling it like it is. We cannot just keep kicking the can down the road,” Yoshikami says, before clarifying that it’s a dramatic way of saying we have to do something about the budget and deficit. In the meantime, he’s expecting strong corporate profits and a boost from lower energy costs do the the recent decline in crude.

As for stocks, Yoshikami prefers diversified, cash rich, multi-nationals with exposure to emerging markets, like McDonald’s (MCD), General Electric (GE), and Walt Disney (DIS). He also likes commodities like oil and gold on expectations for further dollar weakness.

See the full “Breakout” video below:

Related ETFs: iShares Barclays 1-3 Year Treasury Bond (NYSE:SHY), ProShares UltraShort 20+ Year Treasury (NYSE:TBT), iShares MSCI Emerging Markets Index (NYSE:EEM)

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