It used to be referred to as the 600lb gorilla.... then became...

It used to be referred to as the 600lb gorilla.... then became the 800lb gorilla.... and current fashion uses 'the elephant in the room.' These phrases refer to the most pervasive feature or over-riding influence in a situation/environment. I always look for the 800lb gorilla when deciding whether to invest in anything.... be it real estate, motor car or the stock market. Yet many (perhaps most) investors ignore this factor. They are driven by the current fundamentals, short term statistics, fashion of sector, opinion of others..... etc etc. We all thrive off the optimism of others and this bear mkt rally is a typical example. But herd mentality is what drove the insane over-consumption, leverage, greed and finally the collapse of the 2003-2007 period. Investors kept on doubling-up and went into denial re the absurd PE ratios, high debt levels, over production and other signals that the end was nigh for most shares. There was never going to be any other outcome.... getting the timing right was the key.
So what is the current 'gorilla'?? Clearly it has been(for 18months), currently still is....and still will be (for at least 2 more years IMO)..... the world-wide-recession. One can quote numerous statistics.... but unemployment tells the true story. It may be a lagging indicator but the effect is ALWAYS the same. A severe decline in economic activity.
Apart from UGL i have used this rally to reduce my portfolio considerably. i still hold those shares which i bought at double their current SP.... but ONLY if i believe the prospects are reasonable. Hence, the ONLY sector i see with any prospect of growth is infrastructure. The boom in infrastructure is entirely artificial and made with tax-payers money in the form of governments deficits hell-bent on stemming the loss of jobs. Whether i agree this strategy is correct is irrelevent. Labor will keep spending (like Obama and Brown) in order to prevent a possible collapse. But the 800lb gorilla is still alive. IMO the world recession has many many months of life left and the overall economy will fall considerably. Some individual shares (outside of infrastructure benificeries) will do well.... but picking these with any degree of certainty is more luck than anything as this mkt swings wildly. Hence..... i would rather be out wanting to be in.... than in and wanting to get out.
So why did i buy some UGL last week and again yesterday at 10.5?? 2 reasons. As noted in another thread it is very likely UGL will be one of the biggest benficeries from Rudd's largess. And secondly.... i do have a soft spot for this company which is in its 8th consecutive year of double-digit growth with increasing earnings and dividends to shareholders. Sentiment is dangerous and should not be part of any investment analysis.... but i can't ignore past performance and the fact that UGL has diverted its best and brightest to win big from this unique manna-from-Rudd opportunity.