Seeing Through The Fire and Smoke

If you look at the headlines, it certainly looks grim.

• European stocks are at a 13-month low.

• Oil has hit lows not seen since 2003, and not only are the oil companies suffering, but the banks that are holding all those shale play loans are starting to sweat.

• Tech darling GoPro is laying off 7% of its workforce and restated its expectations for 2016 downward.

• Walmart, the world's largest retailer, is shuttering 264 stores, 154 stores in the US and affecting 10,000 US jobs.

• Federal Reserve hawk (pro interest rate increases) and Chairman of the Federal Reserve Bank of St. Louis James Bullard is now worried that low oil prices may hurt the economy and is backing off another rate increase.

• Inflation is down to 1.2% and with import prices lower, we're not 'importing' any inflation.

• Chinese stocks are off 15% so far this month, and off nearly 50% from their June 2015 highs.

Is it time to panic?

No. Bear in mind that the markets operate like nature. Where there is disadvantage, if you stay dispassionate and see events for what they are – instead of what should be or could be – you can find advantage.

A majestic tree falls in the forest and the animals and plants on the forest floor take advantage feeding on it and breaking it down for the good of the forest. Wolves keep elk populations in check. It's a natural balance.

The point is, a free, undistorted market is self-regulating and instead of worrying about the problems, it's best to figure out who benefits from the new situation.

For example, GoPro (the leader in the mini-digital camera revolution) is having a tough go of it but some of that may be the company's fault by expanding too rapidly, and not necessarily a harbinger of economic doom. But there's a very good chance that now that the high-flying stock has been laid low, companies like Apple or Google may see it as a worthy buy. This is healthy.

The problem really is that this isn't an unfettered market. The big corporate and financial interests have been rigging the game so that they could keep their advantage.

But in the long run, they won't be able to manipulate the markets forever and the game is already unraveling.

First the big companies bought back their stock to keep share prices artificially high. The way it works is, if there are fewer shares on the market, then each share is more valuable. But if you look at the stock chart, it just looks like the stocks are rising because the company is doing well. Complete illusion and major companies are still playing this shell game.

Then they started the merger and acquisition machine up to 'buy' growth because none existed. There's an old saying on Wall Street that if you can't find growth in the economy buy it. That means, if your company isn't growing, you buy another company and use the combination as a way to tell investors that you're still growing. This is what many companies continue to spend their huge pile of money on, not hiring workers or actually expanding. What this really does is usually throw people out of work and because the industry is consolidating, those workers have to find jobs elsewhere or take a cut in pay to stay in the industry because there is now less competition. Good for C-suite bonuses, bad for the economy. This scheme is now at the point of collapse in the biotech sector.

Now, corporations are cutting their 'fixed costs' to keep up the illusion that growth exists. Bluntly put, fixed costs are jobs. Walmart and GoPro are cutting their workforce, Caterpillar is doing it as well. And many other companies across most business sectors are either holding off hiring, hiring temps or cutting their workforce.

This is the final leg to go. And it might take a while, but we're now in the Great Repositioning. Everyone is scrambling to reposition for a slow to no-growth year - and it's ugly.

The undeniable fact is, everything reverts to the mean.

What this means for investors is you need to lighten up on any industrials, big financials or transports that you have. Rail and trucking aren't looking good this year and that means there are few goods to ship because there is lower demand. Regional banks are the choice in financials, but not yet.

Also stay away from the international markets. They're in bad shape.

Utilities may be in good shape, depending on the winter and whether the Fed raises again in the next quarter. Not worth the risk right now.

Energy is still too risky, although if you have some serious risk tolerance you can start to look at select midstream players and some small producers.

Your best bet is taking positions in silver and gold. Buy the bullion or just buy some ETFs. Buying gold or silver miners is a much higher risk way to play this trend. As this fixed market readjusts itself the metals will take off. It's likely to be a multi-year trend, so buying in now is a good choice.