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Big Danger in Safe Havens?

Parking money in safe havens to wait out a summer swoon may be the worst move you can make.

So says Jim Paulsen, chief investment strategist at Wells Capital Management.

And he’s not just talking the talk he’s walking the walk. He’s currently underweight high quality bonds, gold, dividend payers and consumer staples .

Huh?

“They could underperform significantly if confidence steadily rises,” Paulsen explains. And if history is any indication – confidence is about to rise considerably.

Paulsen says what matters most is that we’re in year 3 of the recovery. He says the last time we went through major recoveries – in the early 90s and early 2000’s – year 3 was an inflection point – it was the year that confidence started to improve, and improve significantly.”

“That’s going to be a big theme,” he predicts, “steadily rising confidence. And it will come when most investors are putting money in the market expecting another kind of environment all together.”

Of course you could argue that this time is different because of Europe. Who could feel more confident as Europe grapples with recession?

Paulson, however, again points to history. “The crisis will be with us forever but our sensitivity to it will ebb.” He believes Europe today is much like Japan in the early 1990’s.

“Japan was the world’s second largest economy at the time and while Japan went into depression, the rest of the world enjoyed an economic boom. Today, the rest of the world can go on without Europe.”

In an environment where confidence rises and investors grow immune to Europe, Paulson believes safe havens will quickly lose their appeal and risk assets will run sharply as investors begin to chase return.

On the thesis, Paulsen suggests putting money to work in emerging markets, the US manufacturing sector and domestic large cap banks.

“We’ve just gone through a panic, look at what’s been beaten up,” he says. They’ve all been beaten up. In all these areas of the market, “We’re looking at excellent entry points.”

Posted by CNBC's Lee Brodie






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Trader disclosure: On June 25, 2012, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Pete Najarian is long AAPL; Pete Najarian is long BAC CALLS; Pete Najarian is long INTC; Pete Najarian is long JOYG CALLS; Pete Najarian is long SBUX; Pete Najarian is long FB CALLS AND STOCK; Pete Najarian is long MSFT; Pete Najarian is long MOS; Karen Finerman is long AAPL; Karen Finerman is long BAC; Karen Finerman is long JPM; Karen Finerman is long WMT; Karen Finerman is long TGT; Karen Finerman is long MSFT; Karen Finerman is long M; Karen Finerman is short SPY; Karen Finerman is short IWM; Karen Finerman is short MDY; Guy Adami is long C; Guy Adami is long GS; Guy Adami is long INTC; Guy Adami is long MSFT; Guy Adami is long AGU; Guy Adami is long NUE; Brian Kelly is long BAC; Brian Kelly is long PNC; Brian Kelly is long JPM; Brian Kelly is long WFC; Brian Kelly is long XLU; Brian Kelly is long INTC; Brian Kelly is long IBM; Brian Kelly is long TGT; Iuorio Is Long (HOV); Iuorio Is Short (JPM); Iuorio Is Short (MS); Iuorio Is Short (GS); Iuorio Is Long (C); Iuorio Is Short (PCLN); Nations Is Long (SPY); Nations Is Long Citigroup (C); Nations Is Long Bank Of America (BAC); Nations Is Long JPMorgan (JPM)

For For Charles Neivert
Dahlman rose & company, llc, and/or its affiliates may have positions in the securities of (agu), (cf), (ipi), (mos), (pot), (rnf), (uan). However, none of those positions equal or exceed 1% of the equity securities outstanding for the subject companies.

For Dennis Gartman
Gartman Is Long Gold In Euro Terms
Gartman Is Long Gold In Yen Terms
Gartman Has A Short Position In Corn

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