Protecting your nest egg in a recession
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We're right now underweight on consumer discretionary mainly because a lot of the economic growth has been the consumer, and with the problems with housing and credit concerns, we think it will be much more difficult for the consumer to be the main catalyst for the U.S. economy. We're overweight on more defensive issues such as health care, telecom and technology. And we're equal weighting consumer staples.

Be proactive, not reactive
It's more a matter of being in the right companies. Even in technology we're overweight, but our overweight is from a year ago. We plan on selling, and that's my second point: being proactive rather than reactive. What I mean in that regard is we recommended selling the financials and REITs and the utilities in May -- we're going to be selling into the technologies because all of a sudden technology has become a safe haven because it doesn't have the subprime and credit concerns.

If there is a recession, we'll definitely see an economic slowdown that's going to affect technology, too, but investors, with their myopic view, aren't looking at that. They're just looking at, well, you know, there are some hot products that don't have any credit concerns with subprime and this is the sector to be in.

Look overseas
International is another example. If you talk with other advisers, that's probably going to be their No. 1 answer -- go internationally if you see an economic slowdown or recession in the U.S. That concerns us a little bit. We've been overexposed internationally for most of the last seven years. It initiated with us buying a lot of the infrastructure plays after seeing the growth in some of these BRIC (Brazil, Russia, India and China) countries. We've been taking profits in some of those the last year or two and buying more defensive plays in (global consumer staples and pharmaceuticals).

International is a good way to participate as far as outperforming a slowing U.S. economy, but it's to the point that most advisers are saying 20 percent of your portfolio should be international. That concerns us. You have to look at the market globally, but it's not a panacea that you just have international and it will cure all the problems. Just like being in the right areas of the U.S., you have to be in the right areas globally. But that's one way to help the investor who might be close to retirement or retiring and worried about a recession.

Two common mistakes
When we get new clients, they often have a great portfolio in terms of great companies. But the two mistakes we see is whenever the bank trust or whoever managed it before we got their money, they just bought a selection of high-quality companies and they didn't really look into the price or valuation, they just bought across-the-board, good-quality issues. So, 20 percent or so of those companies will be overvalued because they were bought at or near their highs and are now historically high-valued.