Welcome back lady. Well I think we've got a bit of a mixed bag now. If we're just to look at Cat's fundamentals, which I've liked all along, I see no reason why we're not going to $140 this summer. You can get there pretty easy with Cat's $9.25 EPS forecast and 15 average PE. With 20% projected growth over the next several years, the sky is the limit.
However, one of my basic investment pillars is don't be in Cat at the beginning of any worldwide recession. You could be riding a 60-75% slide if the world decides it's going to hit the breaks. If the world maintains the status quo right now I think we've got a long way to go, probably 3-5 years minimum before we see another recession.
But this Iranian nuclear story has me spooked. It sounds like they're not too far from developing their atomic weapons and I think their leadership is just crazy enough to use them. They've said repeatedly that they believe Israel should be wiped out. If given the ability to do so, will they? The basic theory of mutually assure destruction is both sides fear it. I'm not so sure Iran fears it. If Iran behaves badly we're headed for a mess. If Israel or the US attacks Iran to prevent them from making a bomb and Iran retaliates we're headed for a mess. Either way oil spikes to hundreds of dollars a barrel and the economy grinds slower, period.
So, the question to answer is when or if this will happen? Secretary of Defense Panetta publicly suggests something could happen this spring. Israel's PM is visiting Washington next month to talk to Obama. Is it all politician posturing and bluffing or are we in for another major middle east war? The market does not appear to be factoring in any problem at this time with near record highs and good momentum going forward but I just don't see how we avoid violence. So with that said, I would recommend that you should at least have an exit strategy in mind. Cash, gold or oil might be a safe haven. Think through what could happen and what you will do if it does.
It's curious because I think there will always be negative headlines, as that is what sells papers and commercials on the news channels. Most are just so much talk and don't really have a lasting affect. A nuclear capable Iran is more than just a scary headline. This could end very badly. I've moved from Strong Buy to Hold.