I Eat Bear

The simple solution to this market

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It seems so very obvious how to fix this market, yet so many want to look for the "golden carrot" on the end of the stick. And, as long as that happens, the market will continue to suffer.

So, what is the "golden carrot" right now? Stocks of financial institutions and housing markets.
Because they have dropped so much, people keep getting the idea they can "get in cheap", and things will miraculously get better. So, so very wrong in my opinion.

The only sane action I can see, would be a MASSIVE sell off of anything in those two sectors, and for the market as a whole to stay OUT of them for one year.

Yes, drive those shares down to a pittance maybe. They deserve it. Force them out of business? Gee, I hope so. It sure beats having them ruin the rest of what could be a nicely rebounding market, which is exactly what is happening, and will continue to, as long as people try to bottom feed on these sectors.

OK, inflation is a problem. Since when has a financial institution fixed that anyway. It is the REST of the market that will fix that problem, not banks or government (especially government).

Well, I have been known to make some unpopular statements, and I think it is about time for a new term to be recognized. I think we should simply start calling all politicians what they truly have become. COURT JESTERS, or just JESTERS for short. Yes, the JESTERS are in session again, still,,,,,, darn it!

And, this country thinks a new group of JESTERS will fix the problems? Granted, the head Jester, George Bush, has done a lousy job, but OBAMA would be a DISASTER for the stock market. He is the biggest JESTER of all right now. Even if markets tend to rally under democratic leadership, I have to believe, he will be the exception. I know where he can put his tax increases, and it is not too far from his brains and his wallet (all in the same area I might add).

Sorry. Government and financial institutions are not going to fix this. The absence of them might. No, we don't need more tax relief packages. We pay for those, and more than just in dollars. Who are we kidding? There is no wealth resistribution from the rich to the poor, never was, and never will be. Quite the contrary. The rich get richer, and the poor get poorer.

So, what is the fix? Well, I have two. First, sell anything related to financials. Yes, en masse, ie, all at once. Refuse to get back in them for one year minimum. That may force the worst into bankrupcy sooner, which has to be a benefit.

Secondly, and it is more absurd maybe, but the thought has merit. If you are in ANY way, paying a congressmaN (or congresswoman), STOP IT! They should be PUBLIC SERVANTS, and have become anything but. See how many of them hang around, if they are not being paid? And, if you have too much money, and still want to be a politician, you are likely one of the ones we least want or need!.

OK, no pain, no gain. Yes, it will cause some short term hardship. What is so different from what we have now anyway?

A good beginning would be to OUTSOURCE most of government. Private businesses are notoriously better managers than the government. Without their bumblings, we likely would have a healthy social security system. All they had to do, was leave it alone, and they messed that up.

Yes, take away their pensions, and give them pay cuts. Maybe THEN they will feel what some of the rest of the country does. And, by all means, let's give them UNEMPLOYMENT!
How? Simple! Add a new entry on most ballots! NONE OF THE ABOVE! If it wins, leave that spot vacant, until a decent candidate can be found. Ya know, they just might start working for the PUBLIC that way!

All of this sound a little funny? Maybe it is a bit absurd.

There probably is nothing we CAN do about the FARCE our government has become, because THEY have the POWER. (Unfortunately, the PEOPLE they supposedly represent, don't).

But, you CAN have a private selloff of anything related to finacials.

Will things get better tomorrow, if we do? No! They are not going to as it stands anyway. Will it get better quicker? It has a good chance.

And, if I offended anyone by putting political comments in a stock market blog, well, all I have to say, is I think it would be the best for the market as a whole, and as such, has relavance here.

And, of coarse, this just just MY opinion. You are free to have your own.

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Good investing

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I don't think I can stress enough, that the strategy lab is both an investment tool, and a game.

Early in my posts, I stated a goal to beat the indexes, and I certainly have soundly trounced them so far this year, with room to spare. Naturally, I wanted to do well in this lab performance also.

I have to say, I have accomplished both of those goals, and to some degree, I have "led the pack", without violating too many investment rules.

The first rule of GOOD investing, is to be diversified. I look at both the open, and other portfolio's in the lab, and too often, I find that rule has been broken. Well, to be fair, the regular lab has less beginning dollars and that will force them into fewer stock selections. It does however show investors that money can be made, and you don't have to have millions to do it.

Then I look at some of the portfolios in the open, and I don't know whether to congratulate them, or to have pity on them. Yes, maybe the way to win the open lab is to have a few stocks that do very well, but I contend it is a poor way to manage a portfolio. But, if you can make the big bucks that way, should I be one to criticize? Well, I am going to anyway!

I see portfolio's with 25% in a single stock. What a HORRIBLE thing to teach other investors to do, and should we not lead by EXAMPLE?

I do not want to give percentages of what portion of an individuals portfolio should not be exceeded because there are so many different investment amounts. If you have few dollars to invest, you may need to invest in only a few winners. But, as your portfolio grows, the best bang for the buck has to be to diversify.

Maybe I ran too big of a portfolio for this game, and I certainly have a portfolio with more stocks in it than most. Over the coarse of this lab, I have introduced close to 65 stocks, or more, and have fairly consistently maintained about 50 stocks. For a portfolio with a beginning balance of a million dollars, I think that is about a right number, for the stocks I picked.

First, you have to pick good stocks, and that means good companies. Once that is done, then it is just a matter of allocation. But, the job is not done there.

Are the stocks diversified by sector? Now, I am not in every sector, and I don't think you have to be. But for a reasonably large portfolio, how few sectors is reasonable?

I am pretty good at the oil sector, and it could have been a good strategy for this game to put large amounts in just that one sector. In fact, I do have 40+% in that sector, as the sector has been a market leader, but the portfolio is comprised of about 20 comanies in that sector alone.

Well, before I get too windy, and bore everyone, a few sectors is OK in a real dollar portfolio, then just diversify within those sectors. Provided, if the market changes, you are prepared to diversify into other sectors. Without some diversification into other sectors, you may not know where to turn, in the event your previously outperfoming sector goes into a long term downturn.

So, to some degree, I am proud of my portfoio. Not only has it out-perfomed the market as a whole, and many other players, but is composed of good companies, and is well diversified.

Yes, I think for a portfolio of this size, it would be a management error to have much more than 5% invested in a single stock, and I think that rule should apply to most any personal portfolio.

Now, that said, the best use of the strategy lab, is to aide investors to find winning stocks, so that you can add diversification to your portfolio. The strategy lab is nothing more, or less, than a learning tool. Check out the portfolio's, especially in the open. Don't just look at the dollars or percentage gains, but track the stock, over some time. Maybe, jump into the lab yourself, and test a stock, before you decide to buy it for your personal portfolio.

Yes, my portfolio has some stocks in it that are in the red. Better there, than in my REAL portfolio?

And, I wish I had good news for investors, but I don't think we are at the bottom yet. Is that a reason not to invest now? I don't think so. Keep in mind, in times like these, where the DOW is down more than 10% this year, and may be going lower, your results may be far better. In a decidely bear market of late, this portfolio has GROWN by about 18% (yes, it fluctuates) in less than 6 months. Yes, in my mind, that is sucess!

Yes, maybe I am an optimist, but despite a treacherous market, I think you need to be investing for the future. And, this bear market will turn. Investing now, should have you well positioned for the beginning of the next bull market. Dare I guess when that might be? Not soon.
So, get busy, and GROW your porfolio NOW.

Pick your stocks well, but DO pick them! And I definitely encourage people to practice good investing strategies, and that means diversification! Happy investing!

So, in what may be my last post of this lab session, I would like to let you all know, that you too can join me,,, as I EAT BEAR.

And, of coarse, I do encourage you to use the strategy lab. It is both fun, and educational. Yes, I do mean PARTICIPATE, not just watch (but that can be beneficial too).

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Another million please

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I must say I have been a fan of Robert Walberg for some time now, and in a "normal market", it can be quite a job to pick stock dogs, and make a winning portfolio. Today though, I think he has one of the easiest jobs on the planet. Picking a stock dog is about like opening a Wall Street journal and pointing with your eyes closed. The number of beaten up stocks is the highest I have seen it in some time. I do understand his conservative approach to a market in a foul mood lately, but I find too many stocks have just been pounded lately.

Then again, I must say, I am not always right either, as witnessed by my recent prediction of an upswing in shipping stocks. It seems they have seriously gone south on stock price since that prediction, so I have a mountain of gains to make up if that predictions is to be correct. Still, I do have faith. Shipping has been a very volatile industry since I first started following it, and it is not a group of stocks for the squeemish! It can be a true terror ride, if you have large sums invested in it. Still, with today's prices, I want to sink a lot more into it, than I seem to have available, so can I have another million or so please?

Yes, despite what can only be called a bear market, I remain bullish on stocks. At least some of them.

For the world economy to get out of the recession we are undeniably in (despite so many refusing to admit it), more goods and services must be produced. Granted, consumers are strapped to the bone for cash in many cases, but there is money out there. Once goods are produced, they have to get to the markets. Now, I happen to believe, we could use the existing retailers and wholesalers to get goods to consumers, but a few more would not hurt. I also believe we are too heavy on the services sector. So, what is left?

Materials for one. Take BHP for example. Not much more than two months ago, the stock price topped $100. Today, it is trying to survive $80 a share resistance. Much the same is true of RTP, RIO, and some more. Now, we can lie to ourselves if we want to (it does no good), but raw materials will go into just about anything produced, in some form or fashhion. To think that stocks will not recover is foolish. More money please, as I want to load up on materials stocks.
I would have to be cautious on gold right now, but if there was ever a group that has seen a recent pounding, gold, and gold miners would be near the top of the list.I still look for gold to recover with the dollar, but my faith in the dollar is not high right now.

Which brings up another "dirty word". Inflation. Prices are going to go up. They have for the last fifty years, and I see no reason for that trend to change now (there is always hope?). But, and you heard it first here, "Get used to it". You can throw tons of resources to fighting it, and it will still go up. To fight it, could put us in a GLOBAL DEPRESSION. Think things are bad now? They can get worse, and fighting the inevitable, is one of the fastest ways to get there.

So, everyone is looking for the "scapegoat", and I think they have picked on the wrong one. OIL, is now in a category with other four letter words in the minds of many consumers. Don't get me wrong, I hate paying the prices at the pump too. But, are oil companies to blame? I don't really think so.If anything, I think they may have been the savior of many investors.

Now, I am dissapointed in a few in the oil sector, but for the most part, oil companies and stocks have done well this year. That bodes well for investors. My biggest dissapointment so far has been RIG. What, it is one of the better gainers in your portfoilio? Well, I do try to be fair.
Since the merger with Global Santa Fe, they paid out a decent distribution to shareholders of both companies. And, the stock was seriosly under book value as of the date of the merger. The gains I have seen on RIG this year, are to bring it up to book value only. It has only briefly seen stock price apprecaition this year. Much the same is true of DO, and some more. Go back about a year, and the stock price on them was almost exactly the same as today. Yet, drilling is on an upswing this year. Where are those gains reflected in current stock prices? Not in most of the drillers I have found. I look at SLB, and it has had some gains since the round started, but I have to believe it too is grossly undervalued, especially for the earning potential I see there. I have seen some gains in PDE, NBR, ATW, and some more. Maybe I am just waiting for the other shoe to drop, but I see oil drillers as a real bargain right now. RIG will do well again too, as they put the merger issues behind them, especially by next year. And, oil service companies should do well too. Yes, they have seen some run up this year, and I am great a fan of WFT and SII. But, if nothing more than the value I see in them NEXT year, they are at bargain basement prices now!

Before you go think I have totally lost my mind, I should cover this too. Have I not noticed that the market is down SIGNIFICANTLY since last year? Oh boy, have I noticed! And, the real dollars of my portfolio are PAINFULLY aware of it. But, is oil to blame for it? I contend not.
In fact, I have become greatful to it, for it is about the ONLY thing keeping people from jumping from tall buildings right now.

Ok, I forgot to give some credit where it is due. The agricultural sector has some nice winners in it too. And, some LOSERS. I finally had to get out of MON and DE, not because they are not good companies, and good stocks, but because there was no stock price appreciation there this year. They were simply blown away by POT, TNH, MOS, and some more, and I still say TNH is a MARVELOUS stock, in both stock price appreciation and dividend! But, who is to argue with about 45% stock price appreciation in POT this year alone? And, with the global demand for food, no reason to beieve crops will require less fertilizers next year, or that less will need to be planted. Despite high stock prices there, I still feel the need to invest more in it.

Well, if oil and agriculture have been saviors, then who is to blame? Another four letter word, "Banks". Gross mis-management of funds, is likely the real root of all of the world's economic problems right now. Now, banks are going to blame it all on the housing sector downturn, but that just does not hold water. Even if the asset depreciates and goes into default, they SHOULD still retain the asset, and in time, losses from that get recovered by resale to more solvent buyers.But, they had to come up with a derivative for everything, to the point that nobody owns anything any more, and the government, and yes, us, the taxpayer, are getting the screws put to us for it by playing with interest rates and other "normal" market functioning. Ok, I am going to be unpopular here, but let them go broke, and be done with them. I still contend the almost 30 percent of the stock market made up of banks is the real cause of this global economic slowdown, and get rid of them, and the market will rebound nicely.

Ok, I would not invest two cents in anything related to banking, if I totally listened to my conscience. Yes, when I pay the pump price for gas, I curse BANKS (ie, collectively as financial institutions).

But, I digress. My point was, that I think there are so very many stocks at bargain basement prices right now, that I would dearly love to invest a ton of more money into most of the ones I have in my portfoilo already. Yes, I have been scraping off profits from this one to put into that one, but I am robbing Peter to pay Paul. That is just not a good investment strategy.

Oil, solar, materials, agriculture, industrials, rails, shipping, and more, all look too good to pass up, and yes, I do mean at today's prices. I have been far too short on capital, but utilities are a good safe investment that should grow returns over time. I just can't get into them because I need QUICK returns in this game.

Come to think of it, I don't think a million would be enough! There are so MANY absolutely GREAT buying opportunities out there right now. Could it be that I would have it all paid back by the end of next year? Or is that just another one of my missed predictions of the future?

Then comes maybe the ultimate question of all. Do I deserve it? Well, the obvious answer is only if every other lab player gets it too. But, despite some temporary setbacks, I have maintained a portfolio near the top for most of this lab sssion. It is unlikely I will win the round, but I have soundly trounced the indexes, and a fair portion of other lab players. Overall, I would say that makes me a pretty fair investment, and/or investor!

And, I should probably go on record for this too. Strategy lab is a GREAT learning tool, and it can be fun too.

So, do I get points for that? Ok, don't clap, just drop a couple million into my account! I will put it to good use!

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Another million please

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I must say I have been a fan of Robert Walberg for some time now, and in a "normal market", it can be quite a job to pick stock dogs, and make a winning portfolio. Today though, I think he has one of the easiest jobs on the planet. Picking a stock dog is about like opening a Wall Street journal and pointing with your eyes closed. The number of beaten up stocks is the highest I have seen it in some time. I do understand his conservative approach to a market in a foul mood lately, but I find too many stocks have just been pounded lately.

Then again, I must say, I am not always right either, as witnessed by my recent prediction of an upswing in shipping stocks. It seems they have seriously gone south on stock price since that prediction, so I have a mountain of gains to make up if that predictions is to be correct. Still, I do have faith. Shipping has been a very volatile industry since I first started following it, and it is not a group of stocks for the squeemish! It can be a true terror ride, if you have large sums invested in it. Still, with today's prices, I want to sink a lot more into it, than I seem to have available, so can I have another million or so please?

Yes, despite what can only be called a bear market, I remain bullish on stocks. At least some of them.

For the world economy to get out of the recession we are undeniably in (despite so many refusing to admit it), more goods and services must be produced. Granted, consumers are strapped to the bone for cash in many cases, but there is money out there. Once goods are produced, they have to get to the markets. Now, I happen to believe, we could use the existing retailers and wholesalers to get goods to consumers, but a few more would not hurt. I also believe we are too heavy on the services sector. So, what is left?

Materials for one. Take BHP for example. Not much more than two months ago, the stock price topped $100. Today, it is trying to survive $80 a share resistance. Much the same is true of RTP, RIO, and some more. Now, we can lie to ourselves if we want to (it does no good), but raw materials will go into just about anything produced, in some form or fashhion. To think that stocks will not recover is foolish. More money please, as I want to load up on materials stocks.
I would have to be cautious on gold right now, but if there was ever a group that has seen a recent pounding, gold, and gold miners would be near the top of the list.I still look for gold to recover with the dollar, but my faith in the dollar is not high right now.

Which brings up another "dirty word". Inflation. Prices are going to go up. They have for the last fifty years, and I see no reason for that trend to change now (there is always hope?). But, and you heard it first here, "Get used to it". You can throw tons of resources to fighting it, and it will still go up. To fight it, could put us in a GLOBAL DEPRESSION. Think things are bad now? They can get worse, and fighting the inevitable, is one of the fastest ways to get there.

So, everyone is looking for the "scapegoat", and I think they have picked on the wrong one. OIL, is now in a category with other four letter words in the minds of many consumers. Don't get me wrong, I hate paying the prices at the pump too. But, are oil companies to blame? I don't really think so.If anything, I think they may have been the savior of many investors.

Now, I am dissapointed in a few in the oil sector, but for the most part, oil companies and stocks have done well this year. That bodes well for investors. My biggest dissapointment so far has been RIG. What, it is one of the better gainers in your portfoilio? Well, I do try to be fair.
Since the merger with Global Santa Fe, they paid out a decent distribution to shareholders of both companies. And, the stock was seriosly under book value as of the date of the merger. The gains I have seen on RIG this year, are to bring it up to book value only. It has only briefly seen stock price apprecaition this year. Much the same is true of DO, and some more. Go back about a year, and the stock price on them was almost exactly the same as today. Yet, drilling is on an upswing this year. Where are those gains reflected in current stock prices? Not in most of the drillers I have found. I look at SLB, and it has had some gains since the round started, but I have to believe it too is grossly undervalued, especially for the earning potential I see there. I have seen some gains in PDE, NBR, ATW, and some more. Maybe I am just waiting for the other shoe to drop, but I see oil drillers as a real bargain right now. RIG will do well again too, as they put the merger issues behind them, especially by next year. And, oil service companies should do well too. Yes, they have seen some run up this year, and I am great a fan of WFT and SII. But, if nothing more than the value I see in them NEXT year, they are at bargain basement prices now!

Before you go think I have totally lost my mind, I should cover this too. Have I not noticed that the market is down SIGNIFICANTLY since last year? Oh boy, have I noticed! And, the real dollars of my portfolio are PAINFULLY aware of it. But, is oil to blame for it? I contend not.
In fact, I have become greatful to it, for it is about the ONLY thing keeping people from jumping from tall buildings right now.

Ok, I forgot to give some credit where it is due. The agricultural sector has some nice winners in it too. And, some LOSERS. I finally had to get out of MON and DE, not because they are not good companies, and good stocks, but because there was no stock price appreciation there this year. They were simply blown away by POT, TNH, MOS, and some more, and I still say TNH is a MARVELOUS stock, in both stock price appreciation and dividend! But, who is to argue with about 45% stock price appreciation in POT this year alone? And, with the global demand for food, no reason to beieve crops will require less fertilizers next year, or that less will need to be planted. Despite high stock prices there, I still feel the need to invest more in it.

Well, if oil and agriculture have been saviors, then who is to blame? Another four letter word, "Banks". Gross mis-management of funds, is likely the real root of all of the world's economic problems right now. Now, banks are going to blame it all on the housing sector downturn, but that just does not hold water. Even if the asset depreciates and goes into default, they SHOULD still retain the asset, and in time, losses from that get recovered by resale to more solvent buyers.But, they had to come up with a derivative for everything, to the point that nobody owns anything any more, and the government, and yes, us, the taxpayer, are getting the screws put to us for it by playing with interest rates and other "normal" market functioning. Ok, I am going to be unpopular here, but let them go broke, and be done with them. I still contend the almost 30 percent of the stock market made up of banks is the real cause of this global economic slowdown, and get rid of them, and the market will rebound nicely.

Ok, I would not invest two cents in anything related to banking, if I totally listened to my conscience. Yes, when I pay the pump price for gas, I curse BANKS (ie, collectively as financial institutions).

But, I digress. My point was, that I think there are so very many stocks at bargain basement prices right now, that I would dearly love to invest a ton of more money into most of the ones I have in my portfoilo already. Yes, I have been scraping off profits from this one to put into that one, but I am robbing Peter to pay Paul. That is just not a good investment strategy.

Oil, solar, materials, agriculture, industrials, rails, shipping, and more, all look too good to pass up, and yes, I do mean at today's prices. I have been far too short on capital, but utilities are a good safe investment that should grow returns over time. I just can't get into them because I need QUICK returns in this game.

Come to think of it, I don't think a million would be enough! There are so MANY absolutely GREAT buying opportunities out there right now. Could it be that I would have it all paid back by the end of next year? Or is that just another one of my missed predictions of the future?

Then comes maybe the ultimate question of all. Do I deserve it? Well, the obvious answer is only if every other lab player gets it too. But, despite some temporary setbacks, I have maintained a portfolio near the top for most of this lab sssion. It is unlikely I will win the round, but I have soundly trounced the indexes, and a fair portion of other lab players. Overall, I would say that makes me a pretty fair investment, and/or investor!

And, I should probably go on record for this too. Strategy lab is a GREAT learning tool, and it can be fun too.

So, do I get points for that? Ok, don't clap, just drop a couple million into my account! I will put it to good use!

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Making Lemonade

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This has not been a good week for the stock market as a whole. But, before I get all depressed about that, let me mention a few things, which might shed a different light on some of that. Last year, the Dow was hitting a peak of just over 14,100 in July. It got slammed in August, October, and February, with minor gotcha's in between attempted rallies.

Now, I was not a lab participant last year, so I am going to make some statements as if I was, largely because many of the stocks in my lab portfolio are also in my personal portfolio (Yes, the lab has a few more, but hey, they gave me a million, and the lab is a learning tool).

The net affect since July of last year is that the Dow dropped about 12%. Had my portfolio only dropped 12%, I might have been a lot happier. The truth is that my portfolio dropped about 29%, so I had well over double the drop that the Dow showed. I suspect, I am not alone in that boat either, and it happened to many, many other people as well. In truth, I simply ignored the continuing declines, with the idea that the market does always rebound. That was an expensive lesson, but, it will probably happen to me again, so maybe I did not learn enough from it. It is kind of "human" to watch things you believe in, to decline, and to continue to hold it.

Now, much like my lab results reflect, I have had a roughly 20% recovery (gain this year), from what became the February (this year) bottom of the Dow at just under 12,000. So, the net effect is that my portfolio is still down a tad over 9% from last year highs. That 9% could be bad news, if you see it in that light, or it could be good news, in another light. Let's look at both.

Most importantly, I have less, and it is almost a year later. That can hardly be called good news. I think this is the same situation many people today find themselves in, and it does not bode well for the American economy as a whole.

Then I look at the lab stats, and I am in the top 15 people, most of the time for returns. That says a lot of people are worse off than me. I kind of knew that anyway, but it does make you grateful.

Then let's say, the Dow has recovered 5% (I am being gracious here, as it is closer to 4%) from it's low of around 12000, and sits now at 12600. I have recovered roughly 20% of my 29% drop within that same 5% that the Dow has recovered. Keep in mind, my 29% drop was based on a 12% drop in the DOW. So, for every percentage point the Dow recovers, I have gained 4%.

Well, to be honest, there is no assurance that same rate of return will continue. But, since we are not exactly in economic boom times here, it is not a huge stretch of the imagination either, to believe I should beat the Dow. But, at times I like to apply some simple math, which will follow.

I dropped 29% on a 12% drop in the Dow. I am recovering 4% for every percent the Dow gains (but lose 2.7% for each % point drop). When the Dow returns to the 14,100 level it was at before the drop, I should have made 48% (4 * 12 %). In other words, when the Dow is again at 14,100, with consistent return rates as I have been getting, my portfoilio should be a minimum of 19% (48% - 29%) higher than it was before the first point fell from the Dow last August. Now, 19% more for the same level it was at last year, can only be considered a good thing.

Here is the rub on that though. To get that 19% gain, the Dow has to get back to that 14,100 level again. And, it is taking it's good old sweet time about getting there. It will get there, barring some economic disaster. In fact, it will surpass that number, again, barring some economic disaster.

But, assuming any truth to my twisted numbers and logic, 19% becomes the cost of time, within my portfolio. Divide that by the number of years to get there, and you have a real rate of return. And, since I still have less than last year, my real rate of return is still a negative number since July of last year.

So, is the glass half full, or half empty. If market pullbacks, add to gains at the same levels over time, it could be a good thing after all. Then again, none of us are getting any younger either!

So, as I watched the Dow drop 400 points, or roughly 2% this week, I was able to envision my cash register ringing, at some point in time in the future. While 2% down meant a 5% drop today, over the longer term, I was squeezing 8% gains into that 2% on the way back up.

Obviously, it is much better to have pure gains, with no pullbacks. That way, there is no loss to figure into the calculations. But, as long as the market continues to rebound, and it always does, some pullbacks are not the worst thing in the world either. While I still don't particularly like the pullbacks, I have learned, you can still make money on them over TIME. And, that concept alone, is why everyone preaches to be a long term investor.

So, this week, the market gave us LEMONS, and hopefully, I have made some pretty good lemonade. I saw most of the stocks take some beatings. I did scrape some profits on some, and largely bought dry bulk shipping stocks, which got a really BIG downward thump. The more they fell, the more I bought. Time will tell, when that will be a profitable plan, but why am I expecting a 19% return on it this year? Actually, I expect to beat 19% before October's end. Let's see if I am right.

Join me and watch DRYS, TBSI, EXM, GNK, NM, DSX, EGLE and maybe a few more yet. As of the close of business May 22, 2008 stock prices are shown below. Let's see when they add 19%. (Give me break - can we just AVERAGE 19% gain across all of them). If I am right, a 19% gain in less than a year, is nothing to sneeze at.

GNK - Genco Shipping $69.25
EXM - Excel Maritime $50.50
TBSI - TBS International $47.49
DSX - Diana shipping $34.86
DRYS - Dryships $92.13
EGLE - Eagle Shipping $32.04
NM - Navios Maritime $13.08

And, if it matters to anyone, as of today, the total amount of these stocks in my portfolio is 7.5 %. Yes, I also preach DIVERSIFY. But, do it well. And, I did dump some financials. I am just not to good at them, or it is a really dangerous place to be,,, or both!

I do love the sound of a cash register ringing, when people just want to hand me money!

Got lemons? No problem. Make lemonade.

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Akin to the Kentucky Derby?

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Where to from here?

Ok, I slammed the Fed pretty good in my last post, so in this post I am going to tell you how the Fed did investors a favor, and how to profit from it.

Well, first, let's ask the question if I have any right to give advice. It would seem that quite possibly I do. Despite managing a portfolio that is going up and down like a yoyo, over all, it is significantly beating the market. I was listed as 6th on today's current round standings, and my returns are almost doubling the highest player in strategy lab. Ok, blind, plain, dumb luck! Some of that may be true, but to be sure it has had some pitfalls along with those successes. To be near the top for a first time portfolio, is better than I had hoped for. Realistically, I could probably do better, but it could also be a self-defeating purpose. Still, my almost 18% return in 3 months, equates to about 75% or so in annual gains, which is nothing to sneeze at. Then again, a good three month return, is not the same as getting the full year results to match. That is much, much tougher. Then again, considering the Dow is still climbing out of a hole for the year, my results look pretty darned good!

The strategy lab open is a lot like going into the first turn of the Kentucky Derby. A lot of "out of the gate fast", and a mad dash to see who can come out a nose in front at the turn. But, the Derby, is a distance race, and so is the market.

When people talk about long term investing, rarely should they be talking about it for a single stock. Well, for a few years, Hansen Natural did really well, and is doing Ok today, but that is more of an exception than the rule. Too often I see people buy into stocks like GE, KO, and PEP, and hold them forever. I contend, that is a huge mistake, but I recently bought into GE also, and I have dwindling positions in KO and PEP. These companies are great, for an investor looking for an extremely slow growth with a limited amount of downside. They are usually going to make a profit, but it pales in returns to many, many others in stock price appreciation. Ok, at any time, GE could split into about seven stocks, all at higher prices than the current GE stock price. But, it has not done so recently, and it seems unlikely it will in the near future, but I do see pressure on them to provide more return to stockholders. I bought GE because it had an earnings miss, and the stock price dropped about 12%. That is a little excessive for such a stable company, so when the market stops being mad at GE, their stock price should recover nicely. I expect that to be fairly quickly, and a 10% pop up in a short term game like strategy lab, is too much to ignore. Or is it? Needless to say, I did not get a lot of it, For the very same reason that it is not a long term holding. Too many stocks will outperform it, in both the short and long terms. Then again, all market misses are not treated the same. Foster Wheeler (FWLT) had a fourth quarter earnings miss, and I see a much more prolonged recovery for that stock than I do for GE, despite Foster Wheeler having potential for more rapid earnings gains.

But, my point here is twofold. I could probably make up some ground in the strategy lab if I were to "load up" on my best performers, and "dump" the two thirds in smaller positions of other stocks. It is highly likely my better performers will continue to outperform. The lab is a game, and I would be perfectly justified to do just that to try to win the round. That would be a mistake, because I use the lab as a learning tool, and few learn much for very long by stacking the deck in their favor. I could lose some ability to predict which stocks might be about to do a good pop up for my own portfolio, by only playing a select few stocks.

And, my second point here, is once it is gone, it is gone. Whether it is an earnings miss, poor performance, hostile take-overs, or whatever, but when other things in the market are outperforming your stock, you are losing money. That is almost impossible to recover. I am down a tad over 3% from the lab leaders because of some errors I made early, and some unexpected poor results from a few stocks. That 3% is gone forever, and so is the earnings potential of that in continued growth. Over longer periods, I may make gains, but they will always be gains based on diminished results.

Yes, a long term investor, is one who stays in the market for a long time, but because he or she is doing a lot of short term things very well. 8-12% gains on stocks like GE may be good over time, but when you compare that to 40% gains in 3 months on stocks like Potash (POT), you are killing yourself in terms of gains to hold stocks like GE, KO, and PEP for long periods.
So, to say the very least, there is a "delicate balance" between being a "buy and hold" investor, and getting the best market returns. Yes, there is a point to being diversified, but only if your diversification is based on market beating results. It just does not make sense to be diversified by buying into stock losers, just to say you are well diversified. The same is true with under-performers.

But, that brings me back to my original point actually, and one I have made many times in my posts. It is very important to understand your investment goals, and to know the kind of investor you are.

Stocks like GE, KO, and PEP may be exactly what is needed for people, such as the elderly, seeking safe places to put money, at what should beat rates of bank interest.

For the younger, and more risk tolerant, I suggest stocks like (ABP) Abraxas Petroleum, and (CY) Cypress. ABP already has a great balance sheet, and is positioned well in a high growth natural gas industry, and long term growth is virtually assured. CY, is a good technology company, and has a majority interest in a solar technology company it spun off last year. But, you may have to buy into these now, and hold a while to reap whopping big gains later. Still, the price to buy into these is often more atune to the budgets of the younger people.

Meanwhile, look for oil services companies to do a booming business. That is where the fast money is to be made now. Companies like (SII) Smith International, (WFT) Weatherford, and (HAL) will make money because there is a cost to every oil rig, whether they strike oil or not.

Oil drillers will do well for the next couple of years too. You would almost have to have been living under a rock not to have heard of some of them, but look up (RIG), (DO), (PDE), (SLB), (ATW), and dozens of others. It is just hard to lose money there right now (but I manage that too on some days, hahaha), but do expect a seasonal pull back in a couple of months.

Raw materials is a good sector, but has had recent weakness in gold mining. Look for that to recover WITH the dollar, instead of being a hedge against the dollar. BHP is still one of my favorites there, but FCX, KGC, and others are good plays.

Agriculture is another good sector, for the elite in the sector only. There are the rumblings of a bubble, and that could make this sector a wild ride. I have so far been disappointed with some of the bigger names like DE and MON. They have been acting like a GE in stock price growth lately, and that is no compliment. But, the better of the fertilizer plays have been doing very well, with (POT) being by far one of the favorites.

Well, early on I promised to tell you the favor the FED did for us, and how YOU can benefit from it. Now would be the time for that. The Fed, and the media, instilled "market fear" into many investors, and it did two things. Yes, most painfully, it caused a huge drop in stock prices. It also scared many people out of the market, so that large sums of money are on the sidelines. Yes, even Jim Jubak, MSN's own MONEY advisor is advocating almost 40% cash on the sidelines. Well, when that cash starts coming into the market, stock prices will be forced higher. Now, my prediction is the majority of that cash will start to return when the Dow nears 13500, but it would not surprise me to see that some sooner. So, take advantage of some relatively cheap prices now, and buy, buy, buy. It is not a question of if the market will recover. It most certainly will. I think the worst of the short term pain is over. Not that we are out of the woods yet, by any means. But there may be more risk by not being invested, than by being invested at this point. Failure to take advantage of gains will cost you just as much, or more, than riding out some of the rough times I still see ahead. Then again, you must anticipate the market some too. Typically, there is a seasonal pull-back that could begin as early as a month from now. Since we have had so much bottom feeding already this year, the bottom may be in early this year. But, if I was to make my gamble, those of you holding cash, just waiting for October, well, by then you could easily be paying a premium on stock prices to what you could get them now for.

And my last piece of advice, is continue to look for stocks with P/E ratio's not higher than 15 for right now. There are still way to many bears in this market, to venture into anything much riskier.

So, for my performance in this race akin to the Kentucky Derby? Well, I went into the turn up with the leaders at a break neck pace. That pace is likely not sustainable, if the race is to be won. So, I will be gradually moving from oil (which I expect seasonal downturn in soon), and be increasing positions in industrials, technology, and yes, maybe even a small and limited exposure to financials. In terms of the market, that is just going into turn two. In terms of the strategy lab for this round, that is around turn four, and heading for the finish line, and my bed of roses?

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