Dow crashes, global economy slows, fear the winner

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The Dow Jones Industrial Average (INDEX: ^DJI) took a beating overnight, falling the most since the massive 2.5% sell-off on June 1.

Energy was far and away the hardest-hit sector. The drop erased the entire week's gains, and underscores the market's virtual yawn at the Fed's extension of Operation Twist.

What ever happened to all that euphoria following the Greek election result? Easy come, easy go.

US investors who lined up for trading got shot down by a firing squad of weak economic data:

  • The Philadelphia Fed manufacturing index fell to -16.6 in June, following a 5.8 drop from May. The report contrasted sharply with an expectation for improvement.
  • Existing US home sales for May were in line with economists' expectations, but down from the prior month.
  • And then there are US jobless claims. While showing a 2,000-claim improvement over the previous week, the four-week average has hit a high for 2012.

What it means
Prepare for a bit of a broken record here: The drop, with the ASX naturally following suit, and a lack of enthusiasm surrounding the Fed's actions underscores the fragility of the US overall economy. China's economy continues to slow too, as witnessed by the pasting BHP Billiton (ASX: BHP) and Rio Tinto (ASX: RIO) shares received overnight in the US, both down 5%.

Now that we've said that, let's figure out how to make some money off it.

Even though the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) is largely flat on the year, some blue chips have been flying.

Westfield Group (ASX: WDC) is up almost 20%, CSL (ASX: CSL) has climbed 21%, SEEK Limited (ASX: SEK) is up 16% and (ASX: CRZ) has jumped 28%.

These companies have all excelled in 2012 because they are great companies, bottom line. They hail from four very different industries, but all are undeniably top dogs in execution.

It may sound too good to be true, but at times like this when the seas of instability are churning — as evidenced by the 14% spike in the Volatility Index (INDEX: ^VIX) today — we patient investors can crush the market by buying great companies just like these for the long run. It's not rocket science; it's quality investing.

How to find these winners
Sometimes finding a great company may feel like finding a needle in a haystack, but they are out there.

If you're in the market for some less risky, high yielding ASX shares, look no further than Secure Your Future with 3 Rock-Solid Dividend Stocks. In this free report, we've put together our best ideas for investors who are looking for solid companies with high dividends and good growth potential. Click here now to find out the names of our three favourite income ideas. But hurry – the report is free for only a limited time.

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The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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