Complete Stock Idjit

I learned how to buy just fine, it's the sell part that gives me trouble

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Lacking background and not having some formal investing strategy, makes all of this a source of wonderment. Trading from "real world experience" means I fit the classic buy and hold investor, not the day trader model at all.

I have been rewarded by that so far, yet am wary of all that I don't know. The Marketocracy web site is throwing me some curves, as most of the explanation of stock actions require a premium membership. My RIO purchase crashed 50% today, yet it turned out to be a stock split - Marketocracy failed to mention any of that vital information, and has failed to boost the share count accordingly.

Outside of the day to day chewing of fingernails, it behooves me to learn how to sell some of these winners. "Sell into strength" is the mantra, but all of my picks were for the longer time fence, as shortage can only be mitigated by abundance, and much of my purchases involve raw materials - I think there are legs on this horse, and am reluctant to part with the resources I have accumulated to date.

On the technology front, I pare underperforming stocks with much more gusto. Only 1 purchase sold so far, but I will attempt to relieve myself of the laggards (CSCO) to make room for additional purchases.

I hold no illusions about winning this contest, I enjoy tinkering in stocks as an educational tool, more of an affirmation that I have good ideas, than any statement akin to I Know What I Am Doing...

I will illuminate some of the picks I have made in some additional post...be forewarned that they will lack the typical jargon, no "forward looking P/E multiples" or other nonsense - as I am not using any industry indicators other than common sense. Besides, you folks are much better than me at this game, and after being exposed as a dimwit, I won't get anymore invites to the cocktail party..

To all participating, best of luck to you.

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Blue Horseshoe loves Copper

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I originally bought FCX in 2000, just after the bubble burst on Technology. At the time I wanted a gold stock, and Freeport McMoran was cheap, just over $13 a share, and was listed as the owner of the largest gold mine in the world.

Being an unsophisticated rube, it hit all of my requirements; it wasn't tech, it mined gold, and it was cheap. What I didn't know could have filled a couple of Steven King novels, but I got lucky and watched the stock slowly climb upward.

Like most investors, if you pick the stock and it goes up - it's entirely because of your prowess in the market, superior analytical skills, and latent psychic abilities. If it goes down, well ... hopefully no one will notice you bought some...

What I had really purchased was the largest open pit copper mine in that hemisphere. It was entirely accidental, and just blind luck that I bought when I did.

My theory is that copper is oil. It is the lifeblood of most of the industries we call by other names - due to the volume of copper products they use. Copper plumbing is the de facto standard for housing, copper circuitry is the metal conductant of choice for electronics, and nothing of any size can be constructed without tons of copper - something.

With the acquisition of Phelps Dodge, FCX has morphed itself from a "one pit" company, into one of the largest producers of copper in the world. Due to the volume of gold and other metals produced, it makes the company kind of a "tweener" stock - as it tends to rise with the price of gold, and rise with the price of copper.

Copper prices have risen to new highs almost in lock step with oil. The two aren't linked in any material way other than both are in great demand. I don't see this as a passing fad. A lot of underdeveloped countries are expanding their infrastructure; China dominates the news, but India is no slouch either. Whether the expansion is physical or digital, copper is king.

As mentioned in prior posts, I am focusing on natural resources and dabbling in technology. The "spine" of the fund will be scarce oil and minerals - not scarce as in precious, scarce because everyone needs plenty and that demand should fuel the right companies to heights never seen before.

Like you I just hope I pick a couple of good ones among the chaff...

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Everyone hates us, nobody likes us - I gonna eat some shale...

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My portfolio contains a lot of Canadian oil companies, not because they make better beer, it's more of a "hemisphere bedpartner" issue.

I am not a fan of our current regime in Washington, as a Californian it is a relief to know that Texas has outpaced us in producing more idiot politicians than we have. While them "Good Old Boys" is posturing with sabers, we are not so quietly alienating most of the rest of the world, including ALL of the oil producing countries of OPEC.

I take a dim view of our participation in Iraq, I cannot shake the fact that were it not the owner of 20% of the world's petroleum, we wouldn't have bothered with it. That's why I am long Canadian oil companies...

Canada is closer, and a strategic trading partner. If we piss off the rest of the world, it's likely that the huge Canadian Oil Shale deposits will provide us with an increasing percentage of our petroleum imports. The last schematic I saw had the reserves in Canada containing about 10 times what the US ever had - the real problem is that the recovery of those reserves is no simple issue.

You grind oil impregnated shale up, spray it with hot water, and collect what runs off. That more costly than pumping it out of the ground in liquid form. Years ago I saw an article that $45 per barrel was the break-even point for recovering oil from shale, every dollar over that was profit. Now that oil is $80 per barrel, that is a serious chunk of cash.

The biggest issues are the remote locations of the find, and the lack of a pipeline from those locations to the US. I imagine that when three quarters of the Moslem world is burning the US flag, that won't be a problem anymore.

For the purposes of this contest, that is a time fence that is likely further out - but oil is oil, so long as the price continues its climb, all oil resource companies will enjoy a price boost.

The remoteness of these resources also plays well with oil company profits in another really evil fashion. Nobody can see them destroying the ecology of the surrounding area as no one lives there. That should make for lots of short term profits, and a hell of a mess to clean up later when those area become someone's backyard, eh?

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Virtualization, Some Folks Talk about it, Others do it

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VMWare was the easiest pick of all. It didn't require analysis as I was in the process of converting my entire agency to a virtual infrastructure.

The simplest explanation is that Virtual technology allows me to save on hardware costs, lifecycle maintenance and warranties, and power. That is a considerable pot of money when aggregated.

There are 3 main players in the virtual machine space; Microsoft, Citrix, and VMWare. Microsoft has yet to release "Viridian" it's server/workstation product - it's doing what it always does, attempt to bully the market by promising a solution that isn't here yet, hoping to freeze IT departments into waiting. Citrix just purchased XenSource an open source competitor to VMWare, it'll take them some time to assimiliate the product line - as the purchase was only a couple of weeks ago. VMWare is the clearcut market leader, it was purchased some years ago by the EMC corporation, and enjoys a two year lead on all its rivals.

My computer room has about 150 physical servers - each requires rack space, power, warranty, and replacement (on a 4 year lifecycle). After the VMWare conversion is complete, those 150 servers will become 8. The savings due to that reduction of physical boxes is enormous and will impact any companies bottom line.

Like all shops, folks buy servers for discrete uses. Mail, web, applications, etc. Many of these purchases really don't have that many users, so all the processing power of the computer is largely wasted - the server loafs along with 5 or 6 users, using no more than 8%-10% of the processor and memory.

VMWare allows me to aggregate those servers onto a single hardware chassis, now 8 or 9 servers that are underutilized can share processors and disk storage. Through tools I can shrink or expand the resources available to each server, and I can move them from one host to another without the users even being aware of the change.

I can also fire multiple images of servers to expand capacity, and can leave others dormant in case the primary server dies a horrible death - simply activate them as needed.

In short, I save a ton of money on infrastructure costs and maintenance, and increase the availability and fault tolerance of the systems I am responsible for, for us IT geeks - it is truly a win-win scenario.

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I sold something, and no lightning bolt has hit me, yet...

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I managed to work up enough nerve to actually sell something, and I haven't been struck by lightning yet, so perhaps this is easier than I figured.

My dilemma results from being "successful" on every stock in the fund. I'm not wedded to them but it's difficult to sell winners.

I chose to sell all of my CSCO and 2/3'rds of my IO stake. Both stocks are in positive territory, but just barely as they have been treading water for some time.

I have been thinking about increasing the fund in the agricultural areas; I have some small investments in Monsanto and Potash Corp, but have been lusting after buying Bunge (BG).

There are many reasons why the agricultural companies should do well; a sustained interest in alternative fuels, a record corn crop (caused in large part by biofuel interest), record setting prices for many of the common crops, and as world populations increase - someone has to feed them...

I am purchasing BG on Monday at the market open. I have watched in envy as the price has increased from 80 to nearly 100 over the last 3 months, and this is not merely a market reflection, it appears to be the start of something larger.

Bunge has many businesses, but it is the oil seed processing component that I am targeting. If biodiesel and ethanol are here to stay, who better to enjoy the initial boom than those agricultural companies that process oil from crops now? Surely the Chevron's and Shell's of the world will be in this space with both feet, but no one wants a refinery in their backyard - even if it's refining cocoanut oil...

Instinct suggests that those companies that process crops into components will enjoy the initial surge of profits, the big oil companies will quickly catch-up - but only after they buy or construct the facilities necessary to process whatever wins the grain-into-fuel battle.

What I want to buy is that little New Zealand company that has a process for converting sewage algae into ethanol - skimming the surface of wastewater treatment ponds to convert the algae bloom into fuel... They are not publicly traded however....yet...

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Question Of The Week

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Investors everywhere have been eagerly awaiting the Fed's next interest rate cut, and the wait ended with a bang thanks to a bigger-than-expected half-point cut. The markets soared on the news, and we want to know how it affected your portfolio and your trading strategy. What stocks are you buying and selling? And how does this change your outlook?

Unfortunately I don't think this action has done much other than improve liquidity, therefore extending the current rally. My reaction is to hang tight and enjoy the upward progress of the market, but I don't think the Orchestra has been fully paid yet.

A lot of folks have been harmed severely already, and with market opinion the way it is, when the truth outs, the investor will grow wary and cautious and we'll start heading south. The degree of damage will determine the rate, and if a dozen or so companies of stature report dreadful news and dismal earnings, this single cut will be forgotten.

I'm not altogether sure this isn't needed. Didn't the preponderance of cheap money get us into trouble the first time? Sure, lessons have been learned by all parties, but I remain unconvinced that the Fed's attempt at a soft landing won't stir the same issues again.

I don't mean to imply government regulation is warranted, but if there is ample money to borrow their is little to convince me that some new debt instrument will be "baked" by the Green Eyeshade Wall Street Wunderkinder - and we eat the Big One sometime in the future because of it.

Repackaged debt to feed the hedge funds...they're still around and my guess is their appetites are unchanged.

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