Doc's Diamonds

Courage of your Convictions --- Revisited

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Based on some of my recent posts, I want to review my current thoughts and apply them to my next SLO2 moves. I am trying to take advantage of short-term moves that have gone against me (or for me) to strengthen my positions. This emphasizes that an individual investor must research hard and stick to your investment thesis in good times and bad unless new verifiable information changes that thesis.

1) I believe agricultural chemicals have had a great run and are due for a strong pullback.

Action: I will be finalizing my sellout of these from my original SLO1 account by selling all of POT at the market tomorrow. I have also sold all of these from my personal accounts.

2) Regardless of the strong upward fundamentals in the long term for Oil and Gas, there is only so far Oil will pull away from $100. Much of the upward trend is depending on the drop in the value of the dollar and short term disruptions in supply. These are almost certain to correct slightly and oil will respond with a downward bias for awhile before restarting it's upward flight. History has strongly supported this type of price action for oil and the "fast buck" speculators will pull their funds quickly when they see the trend going against them. Similar to the pullback I expect for agricultural chemicals, this does not change the overwealming fundamentals in favor of upward price movement over time. It does give me an opportunity for profiting from these courntertrends. Remember, with contrarian investing it is especially hard to maintain the courage of your convictions but it is essential to do so to profit from the trade.

ACTION: I plan to enhance my ultrashort position on oil and gas by increasing DUG with even a slight further pullback. I am convinced, if I am patient, I will profit.

3) As much as I hope the market turns around by the end of the year, I think the evidence suggests that we are in a recession and a bear market. The recent rally, in my view, was a bear market rally. With that in mind, I think we will be in a downward trend again soon and I want to capitalize on that before rebuilding my long positions.

ACTION: I plan to add to my ultrashort NASDAQ (QID) with any slight further pullback. The NASDAQ is poised to underperform the other indexes even though some of the earnings have been good this quarter. These months are very poor for technology in general and the NAS is tech heavy.

4) Financials are not out of the woods yet. Despite some of the calls to wade into financials at this time, I still feel that bad news is coming beyond what is expected. The credit crisis is not nearly completed.

ACTION: I plan to add to my ultrashort financials (SKF) with any slight pullback.

5) There is no positive short term catalyst for NVidia (NVDA) despite the fact that I am convinced that NVDA will be a strong tech stock going forward.

ACTION: I will trim my NVDA position and look to rebuy below 18.

6) Apple has had a great run. There are multiple upward catalysts but expectations might be too high.

ACTION: I will trim my APPL position by another 1/3 with any upward price movement. I will then hold the rest long term and may add if the stock pulls back after earnings.

7) Verizon has a great dividend and is surprisingly underappreciated. I know that they have a high debt level, but they have multiple positive catalysts including strong wireless and fiberoptic networks.

ACTION: I plan to add to my Verizon position with any pullback.

That is my summary of trends and actions for now. I will update once these changes have a chance to be successful.

Doc