Today, a brief discussion on DE (John Deere) and POT (Potash). In short, I favor both stocks right now. Here are some of the reasons. First, I am a great believer in fundamentals. Coming out of a bear market, all stocks are broken, but not all companies behind the stocks are. That is the case of DE and POT right now. It is a plain simple truth that people and animals need to eat. To do that, they need the fertilizers produced by POT and the equipment produced by DE.
No, they are not the only suppliers of these items, just the best ones. I look at the charts on these, and it corresponds almost exactly the the credit crisis. Prior to the credit crisis, both companies were doing extremely well. DE even had a stock split just over a year ago, due almost entirely to a huge stock price run up in the months before. Post split, the stock price faltered, and I find that is not uncommon. Not fell so much mind you, just failed to continue gains. Enough so, that I had to remove DE from my portfolio, as too many companies were outperfoming it. But, DE is an extremely well managed company. And, based on chart patterns, I see no better time than to be buying DE stock. Neither DE or POT has much of a dividend, and POT has a rather minimal one, putting both of thses stocks in the growth stock arena. POT is also a well run company with the largest market share of potash supplies in the world. PE's on both stocks have been beaten down lately. I like what I see in forward PE's better in DE than in POT right now, as POT has a forward PE less than it's current PE, and DE is about equal. Then again, I favor the chart on POT perfomance. Despite both stocks having made a fall in the last 6 months, the chart on POT is still in an upward trend for the entire year, and it is still outperforming the market as a whole, and by a significant margin. The charts also suggest this is an excellent time to buy both stocks, as they are at near lows. Could they drop lower? Yes, I think they could. But, to do that, they would be right along with just about every other top stock. I don't think there is much risk in either stock right now. DE had an earnings miss recently. Virtually every company in business longer than a year has had those. It is just a short term miss of a companies earnings compared to what analysts want and expect. Likely, both the company, and the analysts are at fault there.

I suppose the answer to whether to invest in these companies comes down to how you want to manage your portfolio, and your personal goals. If you are a long term investor and plan a buy and hold, DE and POT are going to be some of the best stocks available for the next five years at least, as far as I can tell. If you have to have quick gains, I would avoid DE here, and would be very cautious about POT.

Why be so negative about short term on these stocks? Simple. Until the government does something to monitor/regulate short selling, there is no safe stock anywhere. And, turbulent markets will force financial and investment companies to rob profits/value from virtually every stock. No, I do not think they will be immune from this. I do think they will fare better than most.

I can foresee that DE will have a stock price over $120 by the end of 2010, and POT should be well over $300 per share in the same time frame. And, I think I am being conservative in my estimates. I could see maybe a 15-20% gain in DE within a year, and look for a 25-40% gain in POT within a year.

Full disclosure, I own POT, and it is down since I bought it. That does not mean I plan to sell it. I do not own DE, and it is on my buy list. Both have been in my lab portfolio, and POT continues to be one of the top performers there. DE may be added again, when and if, it starts to make stock price gains, which are outperfoming the market. It has not done so recently, and it was removed from my lab portfolio some months ago.

In short, I am a long term investor, and favor the buy and hold. I think theses are two excellent stocks for that strategy. Like so many of us, I have limited resources. As such, I have an immediate buy on POT, and DE is kind of on my wish list.

So, in a market that has been, and likely will continue to be vicious for some months, I can offer little advice except to say "When going to the dance, stick with what brung ya". That is to say, you likely picked stocks from fundamentally sound companies in the first place (let's hope so!). Despite the markets wicked mood of late, good companies are still growing. And, at some point, that will be recognized, and rewarded.

So, at the risk of being very wrong, I am going to make some short term predictions. I think we are near a short term bottom of the market right now, and I do expect a short term rebound. Catalyst for that include second quarter earnings better than the worst fears of Wall Street, and the Olympics. The Olympics solely for the increased spending that will occur, and to a lesser degree the medal count, as Jim Jubak suggests, although he makes an interesting case. I am tempted to add the US presidential election as a catalyst also, but that could swing either way. I expect some skepticism there, and personally think the results will be negative if Obama elected, but I tend to doubt that will happen (again a personal guess, and hope). But, regardless of who is elected, I expect a severe market tumble around February of 2009. That speculation on my part is based on the concept that banking institutions are likely hiding some of the worst yet, and that it will resurface in a big way. And, my faith in government (or lack of it), says they will try to "regulate" markets further, and government interference can only have negative impacts. Yes, I do wish the government would stop "meddling" with things they know nothing about, and to a great degree, I wish much of the government would be made into private sector businesses, where the activities rightfully belong. OK, the government should continue to control national defense, and infrastructure, but stop right there. There is over-kill on social programs, health care, legal systems, and more,,, all of which could be better managed in the private sector, and the sheer cost of the government should be reduced by 25% in my estimation. But, I am also a realist, and I know that won't happen. We will have more government, more government meddling, and higher taxes, at both personal and corporate levels.

Well, that is part of the economic background, as I foresee it. Ok, to answer some other pressing questions. What will happen to oil prices? This has not been a typical year exactly, as typically, oil sees lowest prices in mid-summer. This year it hit highs in mid-summer. I hear people talking about oil as low as $80 a barrel fairly soon, and some that believe $110 a barrel is more realistic. I believe $125 a barrel is more realistic, and a spike to $160 a barrel is likely just to remind people of that. Yes, I expect that in the next six months, and it may be peaking in about January, would be my guess.

So, in such an environment, I continue to overweight oil and oil service companies. In fact, there will be few changes to my portfolio at all. Despite an earning miss, Weatherford should do well. Smith International should continue to shine. Drillers like Transocean, Atwood, Schlumberger, Nabors, Pride, Haliburton, and others should do well. Fundamentals for natural gas are still improving, so despite taking big hits lately, I expect good things from Chesapeake, Devon, and Abraxas (which by the way changed ticker symbols from ABP to AXAS). I like Chevron, Conoco, and Marathon too, and all for different reasons. First, they hold value pretty well, but they too have taken big hits lately. They are not the best holding for a lab because they do not have fast stock price growth typically, but they are very good long term holdings, and they can serve as place-holders in a stock portfolio, so you can see how other stocks perform relative to them. Marathon is even talking of splitting exploration from it's refinery business to add stock holder value. I may yet be adding positions there too, as it is a well-run company, despite underperfomance of late.

Fundamentals for coal and steel seem to be much the same as they were before too, despite these industries taking big hits in stock prices. Yes, costs for them have been increasing, but at some point, those costs will be passed through, and I expect these stocks to regain some ground too. So, Arch Coal, Accelor-Mitel, Joy Global and US Steel will remain faithful parts of my portfolio.

And, rightfully, or not, I still favor many of the down-trodden. Manitowic is down huge, but reported a 37% gain in second quarter earnings, and still fell, due to disfavor of it's acquistion of another restaruant services company. Terex is also down significantly from last year. Cranes are not my favorite sector, but I am not foolish enough to believe we will not have more construction over time, so they remain in my portfolio. If they shows any signs of rebound, as they should, I would be adding positions there also.

Technology is due for some rebound according to some analyst. I got seriously burnt with some solar stocks in the last round, but First Solar did perform well, and I expect that to continue. Cyrpress Semiconductor can only be called undervalued, as it's stock price is almost solely based on it's solar company subsidairy. Still, it may drop again, as it has been making a recent rebound. Western Digital has been in what Jim Cramer would call "the house of pain", but I still think the fundamentals of both the company and the business have merit. In fact, if I get some extra cash, I would be adding IBM and Google here too, and likely will, mostly for the long term potential I see in them. I will maintain postions in Apple and Research in Motion as they are best of breed currently for telecom equipment providers, but I reserve myself there, and doubt I will be adding positions to these for some time.

I still have a lot of faith in agriculture stocks. You simply can not bet against Potash, Agrium, or Terra Nitrogen. They will add both stock price, and or dividends. I like Deere, as it is a well run company. I wish it had faster stock price appreciation, but it is a good long term investment. Same can be said of Dow Chemical, Monsanto, and a few more.

I like mining as a sector, and I still favor BHP, RIO, and RTP. The sector has been getting killed lately, but being down 30% or more from recent highs, I continue to expect rebounds from these well run comapnies also.

I like shipping as an industry, and Genco, TBSI, and Diana Shipping remain favorites, but I may keep Dryships in a small way. Other shippers stocks will likely be sold to make way for more productive growth stocks.

I find disfavor in health care, banking, consumer staples, and utilities. Health care is just to volatile, and much too much like playing the lottery. Still there are some good companies here, and I may have to add small positions (mostly for the diversification, and I am a great fan of diversification). Consumer staples and utilities are good slow growth long term investments, but in both of these cases, the market will simply outperform them. And I will not go into a tantrum on banking, but I think anyone who invest in banking related stocks ought to be put on a wall and shot. The downfall of this market has been due to mismangement by financial institutions and to reward them in any way, past, present, or future is simply an injustice. I got out of Visa and Mastercard may follow. Not so much that they are bad companies, but they are finacially related, and my conscience hurts me when I think how much that they capitalize on those financially hurting the worst, in many cases. So, if I lose by avoiding these sectors, my conscience is clear, even if I am not ringing the register as fast. I don't expect to lose anyway.

So, in short, I am counting on TIME to cure the ills of the market of late. I had a nice pop up in the last round of the lab from most of these very same stocks, and when the market again comes to it's senses, I expect it to do so again.

So, if wishes were horses, beggars might ride? Well, I wish we had more individual investors, and far, far fewer funds. Either way, I still am of the opinion there is still a lot of money in the stock market sidelines, and when that returns, supply and demand is going to push stock prices up. Yes, in the longer term I am bullish. Even for the short term, I am bullish, but I expect a fairly big hiccup to the down side after the first of the year (my prediction is February).

One might say, well, you have missed a few predictions, and you would be correct. I have gotten into good companies at the very worst of times, and paid the price. I have ridden stocks too long on the way down because they still have good fundamentals. I have gotten out of stocks to only see them rebound later. Learn from my mistakes, as I have tried to. I still maintain, the biggest mistake you could make is to not have positions in fundamentally sound companies. The stock market is one of the few places on earth, where TIME is your friend.

And, I wish I knew how to, or if there is a way to do it in the lab, but I can not think of a better time to be adding positions with stop/loss on them. This market is too volatile not to have some "automatic" sell points, and depending on the volatility of the stock in question, I have two theories there also. If it is not very volatile, warn at a 5% drop and sell at an 8% drop.
If it is very volatile, warn at 8%, and sell at a 10% drop. If I could, I would have this on each and every stock I own right now.

With the market bouncing bearly above bear territory right now, if you have not bought in, I would not wait much longer. Almost assuredly, within two years, it will have made a significant gain for you, even if it is just marginally fundamentally sound. The more fundamentally sound, the bigger the safety net, and greater likelihood of even greater gains.

And probably the best advice I can give you, is to continue to overweight oil (especially oil services), and agriculture (especially chemical companies).

Why? Fundamentals, fundamentals, and fundamentals!

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.

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).

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!

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!

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.

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?

Ok, I violated some of my own investment rules, and I am paying the price for it. The first rule I violated was the diversification rule. I am well diversified in a few sectors, not the broader market. Hence when time for the beatings in my sectors, I absorbed all of the losses, and benefited from virtually none of the gains in other sectors. That may be OK, if the beatings do not continue. I have little assurance that the beatings will not come more often, and more severe though, than other sectors. Still I have some faith in my sectors, and strategy, so while I may shift some from losers to gainers, I don't plan to change that much else in the portfolio. Keep in mind, I am a long term investor. There will be volatility, and some weeks your sectors will not perform as well as other sectors. With proper picking, your stocks will outperform over time.

The second rule I violated, was in a bear market, as we have had lately (despite some people
saying we are not there yet officially), I had some stocks with P/E's over 15. Those are just stocks lining up for a beating in a bear market. The losses I took there, well, I have nobody to blame but me.

The third rule I violated, was "know your limitations". This is true especially in two separate instances. I have kept some under-performers longer than I should have. Most of them I thought had upside when the stock price was much higher. Failure to listen to Mr. Market, has cost me more than I should have let it. Some stop-loss transactions could have saved me several thousand dollars. Normally, I don't feel the need for them, but a bear market is not "normal". The other failure I made in this category deals a lot with the shipping stocks I have. I firmly believe there is a lot of money to be made in shipping stocks, largely just by playing the volatility of it. But, there just have been far fewer up days than usual in the shipping day rate indexes, and in truth, I did not make sells and buys when I should have to make all of that work.

OK, that is the shame on me. Is it going to get better? Well, I try to mange towards it. Truthfully, I don't think we are ready for it to get better yet. Last Monday, I looked at current vs forward P/E ratios across my entire portfolio plus a few more. It was frightening. Something like 45 out 50 stocks had forward P/E's less than current P/E's. So, essentially, either earnings have to go up significantly, or prices are not at bottom yet. Or possibly every Wall Street analyst has it all wrong. Wouldn't that be nice, but I doubt that many are all wrong. Since earnings only come out about four times a year, likely some stock prices are still mostly in drop mode. But, if there is a positive side, I have seen a few stocks start to bounce off of recent lows. All stocks do not bottom at the same time. Some of the rebounders, are some of the same that have taken the worst of the beatings too.

Now for the shame on us.

Personally, I think it has become abundantly clear that financial institutions/ investment brokerage firms have way too much pricing power over stocks. If there were just a housing bubble, most of that sector would be down, but it would not have had the impact across all sectors as we have seen. That overall downtrend has almost certainly been due to the mis-management of financial institutions. Yes, they may be covering for the failed mortgages, which may be related to the housing bubble, but they are also suffering from making bad decisions on loan qualifications, and security pricings to clearing houses. These financial institutions typically have large volumes of stocks in their portfolio's also. What we have seen a great deal of lately is these institutions being forced to sell off large volumes stocks to cover margin calls, and to gain liquidity. It is this group of volume sales which have caused the market prices of virtually every stock to fall.

Secondly, these same institutions have "tools" at their disposal which "disadvantage" an average investor. By using computerized trades, multiple buy orders can be generated, each with a successively lower bid price. So essentially, when they submit the sell order, there are enough "buys" to get back a substantial number of the stocks being sold at a now reduced price. If they can maintain roughly the same number of shares, through repeated buy and sell transactions, by forcing the stock price down, they have essentially freed up capital without losing any market share in any of the stocks. Now, one could argue that companies have been bitten by use of the computer generated trade programs, but I think software has been improved to the point now that much of the risk here has been removed. Yes, I do think they have some pricing power, and it is based more on the volume of stocks that they have than the tools which they are using that may cause stock prices to drop, but coupling that volume power with technical computing power does give them significant pricing power. And, I think that is what we have seen lately. The trend on lower stock prices across the board is likely more to do with financial institutions forced into "fire sales" on individual stocks (of which they own many). But, I find some issue with being able to maintain a roughly equal percentage of shares, with only the price being forced down. I am pretty sure that is a good percentage of what the market has seen going on here lately too.

And, things are worse than that. I truly hate to pick on a sector, as I feel compelled to today, but I see no choice but to state the obvious. The recent actions of the Fed have virtually proved the market is a system of "of banks, by banks, and for banks". Technically, you can substitute "financial institutions" where I said "banks" in the previous sentence, and it might be more accurate. The so called relief of the "credit crunch" (created by financial institutions mis-management), and implemented by the Fed via reductions in prime interest rates and taking over "risky" assets as security for loans to "banks", has acted only in the interest of banks. It has devalued the dollar, weakened the economy, thrown scare tactics into the markets, and in general assisted almost nobody except "banks" that should fail anyway for mismanagement. Yes, the Fed says they are staying out of that arena, and allowed the recent sacrificial lamb to be Bear Stearns, to provide the ILLUSION that they are not in support of financial businesses, when in truth they are doing virtually everything to sacrifice the consumer, and ultimately, the taxpayer (you and me). Yes, someone has to pay the bill for all of this. "Banks" reaped rewards in the "good times", but it is "Everyday Joe" (you and me) that will pay for it in bad times.

So, in short I do think our market system is "broken". I do think financial systems need more controls on the kinds of transactions they can generate, which may involve anything from volume control, pricing of transaction fees, frequency of allowable trades, to who knows what. It needs fixed, but I do not claim to have the answers to what all that fix might entail. But, it is abundantly clear to me, the system is "broken", as we have allowed too much pricing power, by a few. And we have allowed it to go on, and done nothing to fix it. For that alone, Shame on Us!

This is not a simple issue by any means. These same institutions are also supporting the retirement savings in many cases, of large volumes of citizens. But, in the end, the price controls they are implementing, are affecting stock owners world wide, and well beyond the scope of a managed portfolio.

And in defense of these same "financial institutions", and in their impact on our "American Stock Exchanges" (which are truly global in utilization), I am not sure the fix is in "banking", as they are just trying to compete on a more global level too, as they possibly should.

Remember the "good ol' days" when the price of a company's stock depended on the performance of the company, and not on the ailing financial institution the company may have heard of?

If I was to make a speculative guess on where to start to fix the problem of too much control on stock prices, I would guess, there should be a significant premium charge on sales of large blocks of stock. I don't think it would hurt to have a limited number of buys and sells on a single stock by a single investor within a short time frame of 1-3 days. Maybe the answer is to put the SEC to work. Those that don't want to could join the ranks of the unemployed. I am sure some of the unemployed would love a crack at what they have not wanted to address too, and some of them may even be better at it
.
It is hard to put such a large topic into such a small space and do it any justice at all. I have listed the highlights only. Some is my opinion only, some would seem to be glaring facts. But, in short, I have not seen much to be proud of lately, in my portfolio, or the market as a whole. And, as long as banks are in danger, so is everyone else. That to me, is just wrong. So, until we fix it, or at least recognize it as a problem we need to address, Shame on US All!

Government of, by and for a few, has never been what America is all about, even if it only relates to financial government. We do regulate other monopolies, and the financial systems have collectively become just that. A monopoly, strong enough to impact the overall stock market (especially relating to stock price), wealth and future of investors world wide, and ultimately to the consumer, and especially, the taxpayer.

And, a quick note on the George Bush proposal to "give" tax rebates back this year as an "economic stimulus package". Are we so nieve, as to believe we will not be paying for that too?

So, while we are taking things "up the pooper", will someone please pass the toilet paper (from a company I own stock in please)?

That leaves an investor with few options. Staying in cash is certainly a decent option, as at least you may not be losing money, like much of the market is right now. Buying into gold is somewhat of a hedge, and may keep up with the major indexes, or beat them slightly. With the fed pouring money into the economy, the value of the dollar will drop, and inflation will go up, even if only slightly.

But, is there anything better than gold? Well, one could argue, platinum right now, as it has seen prices rising at a rapid rate lately. But, that is pretty much another precious mineral too.

Today, I think there may be something even better, and it is a stock that meets all of the demands of "I Eat Bear". The stock is (TNH) Terra Nitrogen. Yes, in this case, I think nitrogen, may be the base product to beat gold, especially for this stock.

Why?. Well, as a chart fan, the trend has been only upwards in the last year. But, in this case I think there is a far better reason. The dividend. TNH is paying a dividend of 14+%. Hummm?
As long as the stock price does not drop significantly, there is a good chance to beat the current interest rates at least. Even with some drop, you could still be ahead. And, with the market as a whole looking for places to put safe money, this could easily be one of the places they look. As they do, this could force the stock price up, even in the unstable market we have right now. And, it has one of the lowest P/E ratios in the sector, something else that makes a bear eater very happy. Take a quick peek at the earnings estimates. I like what I see there too.
The demand for agricultural fertilizers should be up this year too. Another boost.

Now, I don't even know if the strategy lab processes a dividend, or not. I do have several stocks in my portfolio that have hefty dividends. The stategy lab, is a game. Making money in your portfolio, is not. This stock shows every reason to have price growth plus a hefty dividend.

Is there a downside to this stock? Well, they may experience some increasing cost structures to production due to high oil prices. They have a profit margin large enough to absorb most of that, if need be.

So, today, I added this to my portfolio, and I think I will be adding more to it later. Lately, I have been taking a beating on some solar stocks, and if they do not turn around fairly quickly, they will be toast, and TNH may well be my "flight to safety".

Will it beat gold in the near term? I think it has a very good chance to do just that.

And, not every decision you make will be a good one. Don't let that get you down either. Practice makes perfect, everywhere except the stock market. Sometimes, things there just don't make sense. Stock may exceed earnings estimates, and the stock price may fall. And, I have seen earnings misses, and the stock price go up. Mostly though, and earnings miss means a big drop. I find myself guilty of that today, with (STP) Sun Tech Power. I should have known better. A day late, and some information short, and I am guilty. On the day I was so busy looking at charts, I neglected to look at recent news. While the chart looked good, and still does, they predicted an earnings miss, and today they got it. The result was a 15% drop in stock price today. Yes, I had added another 100 shares to it just the day before, so my losses now, are bigger than before. OOPS.

If a stock is good enough to buy in the first place, it may be good enough to hold for a longer term. OK, solar is risky, and often over-priced right now. The P/E ratios are sky high on most of them, and that is particularly risky in the bearish market of late. Not something a person who goes by "I Eat Bear" should be doing? Possibly, that would be correct. Then again, a good uptick in the sector could make me right where I want to be.

Now, the market has a fairly long memory, so it may takes a few months before STP looks like it may recover on stock price, but I think it will recover. And selling now, would likely be a big mistake. I do not want to lock in losses.

And, to tell on myself some, I was trying to sell half of my position in (GME) Gamestop. But I pressed the "buy" button, instead of the "sell" one. Ok, I laughed, and then sold to the correct level. Sure it cost me some, and the stock just is not showing me signs of quick recovery, despite a decent chart. Yes, I kept some of it anyway, but, it still is not my favorite sector.

Then again, I will mention two of my still favorites. Both BHP and DO were down pretty good after I first bought them. But, they are both either back into positive territory, or very near to it.
My point on this, is making money on a downturned stock, is still making money, in the long run. There will always be stocks that are down for some short periods. You did not plan on the downturn when you bought it, but it did drop anyway. Hopefully, that will be the case with only a few of your purchases. In a diversified portfolio, some stock go up, and some down, on most any given day. Maybe they dropped due to the whole market dropping, or maybe just that sector that day, or as did DO and STP, they had an earnings miss. But, if the fundamentals on a company are good, hold that stock. While you may have lost money on the way down, you could easily make money on it, as it recovers. To turn it back into a profitable stock may just take longer than you expected.

Maybe I should practice what I preach sometimes too. One of my golden rules, is never ride a stock down more than 20%. Usually, down 10% starts getting me to look at the company fundamentals a little harder, and often that will lead to reducing some positions in that stock.
But, to be very honest, I have been wrong on some there before too, and kept them beyond that 20% drop level. I know I am not alone in that boat either. All I can say there, is shame on me.

But, you need to have FAITH, in the companies you are picking. You picked them for a reason. Don't let short term market adjustments cloud those decisions.

I am pretty sure I was right to make BHP, DO, and yes, even STP part of my portfolio. Maybe my timing was bad pertaining to when I got into them. But, as I withstand some of the short term pains, I do expect long term growth from these, and my fingers are not on the "sell" button for any of these,,,,,,, TODAY. They are not my children. I will part with them, when the time is right. Will it be during this game period? My guess right now, would be NO.

And to add a little humor here, well, am I always right? Heck NO! Then again, my portfolio is making money. Maybe not fast enough to win the game round, but I have not lost FAITH either.
My picks still have a chance because I made good risk vs reward decisions, and have enough diversification to withstand some short term losses, especially in a single stock.

Now, pardon me, while I go kick myself a time or two, for some of my blunders.

The market as a whole is showing little tolerance right now, and there have been more and bigger down days than up ones. That could make for a great case for holding cash in high yeild mutual funds. It is guaranteed, slow, steady growth. There is something to be said for that in a market like this one. But, it is not much fun, and it may not make the best returns.

So, let's examine some other stategies. Well, there are some stocks that offer dividends near what many mutual funds pay. (DSX) Diana Shipping is one. This is a good company, but in a very volitile industry, in terms of stock price. It may not work for some of the less risk tolerant investors. If you want stable stock prices with medium stock price growth, and a tolerable yeild, maybe you should look to (T) At & T or (GE) General Electric. Larger, more stable companies, provide good long term capital that compounds nicely over time.

But, bigger is not always better. Nor, is it always worse either. Typically, it just means slower.
When the market is up, they grow slower, and when the market is down, they fall slower.

Then there are questions about what sectors will do best. That is a big part of how your portfolio should be allocated. Obviously, if one sector is in phoenomenal growth, you want a lot of it, and a sector under-performing you may want none of.

Bigger or smaller, oil or banking, dividend or growth, those are the kinds of decisions an investor has to make. Then there is buy, versus sell.

It does not take a rocket scientist to figure you want to sell high, and buy low. That is the way to make money, whether it is the stock market, or a household budget.

So, first, I suggest pick a direction. Determine your tolerance for risk, and pick sectors you expect to do well.

I am fairly risk tolerant, but not to the degree of concentrating on micro cap growth. You could make or lose a lot of money that way, and the scale tips a little more toward big losses than big wins. Nor, do I want to deal exclusively with large lumbering giants that provide reliable, but slow, long term growth, especially, in a short term game, like this lab is.

Now, I have limited myself on some sectors. I have avoided banking. It is not particularly my area of specialty, and the sector has being going down the crapper lately. I expect that to continue. I am heavy in oil, industrials, and materials. I expect at the very least, some stability in those sectors, if not a fair degree of growth over the next two years.

Quite simply I want market beating returns. A good way to determine that, is to look at chart patterns. So, I made some initial stock picks, and I think they were all good picks, although all are not beating the market right now. So, how do I improve on that?

There are some simply awe inspiring chart patterns out there for many companies. (ATW) Atwood Oceanics, (FSLR) First Solar, (POT) Potash, (MON) Monsanto, and TBSI, to name a few in this portfolio.

And there are some in this portfolio, that are not so awe inspiring too. Not that they are not good comapies, or don't have good potential, just that they are currently underperforming compared with other companies, and the DOW and S&P as a whole. I simply can not afford to keep stocks that are under-performing anything, in a short term game, such as this is.

So, I am about to make my first sells, and soon, some buys, on stocks that are at the bottom of chart patterns with good growth potential. The stocks I will sell, are all good companies, but I think I can beat the growth, by picking other good companies. Actually, I will not be adding companies, as much as increasing positions in ones I have.

My underperformers are not based so much on what has been made or lost, but that they simply do not have the more rapid growth I need. So, here is that list. (BA) Boeing, (OSK) Oskosh, (DD) E. I. Dupont, (GFI) Gold Fields International, (CCL) Carnival are all underperforming the DOW right now. Under other circumstances, that could make them a buy, if the rapid growth potential was there. I see growth for them, but not fast enough. I do like them all however, for a very long term investor. Then I have a few, bairly beating the DOW too, like GLW (Corning), (IRBT) I-Robot, and (HON) Honeywell, and (TEX) Terex, so at the very least, I will be reducing positions in them.

Why? Because there are som SCREAMING BUYS out there right now. Yes, the energy sector has most of them, but each sector in my portfolio has some. They are all near the bottom of chart patterns that show great growth.

You just can't go wrong with energy. (SLB) Schlumberger is cheap!, as is (SII) Smith International, (STO) Strat Oil, (MRO) Marathon, (NE) Noble, (CVX) Chevron, (NOV) National Oilwell Varco, and (DO) Diamond Offshore Drilling. I will be adding to ones I have smaller positions in, and (SLB) is a MUST!

In industrials, my buy list is actually some of the stocks in my portfolio which have been under-performers or marginal performers, but that list includes (CBI) Chicago Bridge and Iron, (FWLT) Foster-Wheeler, (STP) SunTech, (MTW) Manitowic, and (CMI) Cummins.

In health care, I do like (MRK) Merck, and I have it as a buy, but I may have to reduce position on it right now, simply because I see more growth elsewhere.

Then there are some stocks at the top of their chart patterns, and selling high, is always a good idea, but these are also some of the best to hold too. (TBSI), (JOYG) Joy Global, (RTN) Raytheon, (GG) GoldCorp, (KGC) Kinross Gold.

Buys I would love to make in other sectors, (BHP), (FCX), (RIO), (LVS), (GME), (CY), (TSL), (LDK), and (KO). Some of those will have to wait, either because I have a large enough position in them now, or I just plain ran out of funds.

I might add, a current down postion in a stock, is not always a reason not to buy it, and an up position, is not a reason to keep it. Nor, should we ignore those factors, when making decisions.

But, I like chart readings, and I think they can tell you a lot about when to buy. Buy on the uptick, after a big dip, with a lot of DOW beating growth. Use Bollinger bands, and look at trend growth. Charts can also be useful on when to sell, but avoid temptation to sell, just because a short term trend line points down. You may want that later, and the price to buy it back, may be higher than what you sold it for.

I added TBSI and added shares to DSX. Shipping is a very volatile industry, especially in stock prices. To add these now, is a little like being a day late and a dollar short, as they went up significantly today. But, that is telling me the beating that shipping has taken lately, may be the beginning of a significant turnaround.

Solar also had a stellar day today, so I added LDK, ASTI, and FWLT. This is another volitile group of stocks, with Foster Wheeler (FWLT) being by far the most stable of this group, and the best diversified. All of these stocks have great chart patterns. Ascent Solar Technology is the riskiest in my opinion, as they are not making money, and have yet to produce anything. But, the stock price is reasonable. It is $12 under it's 52 week high, and $15 over it's 52 week low. So, it is in the midpoint, and if the market is kind, I should get good stock price growth. LDK is a Chinese solar wafer producing company. It is one of the most pure plays on the solar industry, but not quite the market leader, which I think is First Solar (FSLR - also already in my portfolio). But, the stock price on LDK is much more reasonable than FSLR, so rather than add more of a stock with an expensive price, I added one with a more reasonable stock price. It also adds more diversity to the portfolio.

I also took this opportunity to add shares to RIO and FCX. They are both good companies. RIO produces iron ore, and FCX is in gold and copper. I simly did not have enough of that in this portfolio.

And I might take a moment to defend the down-troddon in my portfolio again too. As luck would have it, two of my favaorite holdings are currently my biggest dollar losers. Yes, they are BHP and DO. No, I do not plan to get rid of them for short term under-performance. These are EXCELLENT long term holdings. BHP is the largest, and most diversified miner in the world. Investors simply have not had faith in the BHP plan to take over RTP (Rio Tinto). I think this aquisition will occur, and it will be a good thing, in the long term. In the short term however, the cat fight will hurt the BHP stock price. But, BHP is a good fundamentals company, and has excellent long term growth potential. Diamond Offshore Drilling (DO), simply had an earnings miss. Not a big miss, but a miss none the same. And the stock price is suffering for it. As one of the best deep water drillers for oil, in a year with projections for increased drilling activity, I have to believe this stock will take a positive turn in the near future. OK, because they took the big dip down early in this game, I may not get the nice returns on them that put them at the top of my dollar winners. They have some ground to make up first. But, I continue to believe in long term investing, and as a long term investor, to fail to have positions in BHP and DO would just be foolish, in my mind.

As I look at my portfolio, I am beginning to like what I see. It is reasonably diversified. Not in all sectors though. It has no banking, limited health care, no real estate, and very small consumer staples. I can live with that. Those may be becoming turnaround industries and sectors, but I just don't think they are ready to contend with mining, industrials, and energy, which my portfolio is loaded with. So, I am counting on slow and steady wins the race. Now, I do have a fair number of very volitile stocks in this portfolio. They could shoot either direction, on any given day, and likely will. I live in hope, that they go up in the short term particularly. I also have many good dividend stocks, so there should be some growth there as well. I have recently reduced my cash position, and am now pretty close to fully invested in stocks, which is what this game is all about.

I am not a "day-trader", so you will not see me making a lot more trades. I did my homework, and picked what I consider to be many of the best stocks for the next two years. Yes, the game will be over before then. Picking good companies is about long term growth, and ultimately, that is part of the game too. Especially for your own portfolio.

And lastly, I would mention I have a reasonable number of stock picks, not a ton of them. I have no doubt a few winners of the round will have fewer stock holdings, and be sector limited. While it may win the game, it is a poor way to manage a portfolio. One should never have so many stocks, that you can't keep up with the fundamentals of each on. In short, don't over-extend yourself, but stay diversified. Probably, if you have more than 50 stock holdings, you have too many. Keep in mind, you still need time to evaluate companies that are not current holdings, as well as the ones that are.

First I added positions in QMAR to the tune of 600 shares. As an aquisition target of Excel Maritime (EXM), it is just plain under-valued. the takeover price put it at just over $26 a share, with $13 a share to come back in cash and almost half a share of EXM for each QMAR share, it offers both cash back, and shares of EXM. And EXM will retain the management of QMAR.
If I made a mistake here, it would seem to be I did not get enough of it.

I wanted more gold stocks, so I added Goldcorp (GG) and Gold Fields International (GFI). Both are gold mining companies. Niether stacks up to Kinross Gold (KGC) as a gold mining pick, but they add a reasonable diveristy at a time gold prices should be going up. I will also be adding 200 shares to Freeport McMoran (FCX) on the next dip.

Yes, I still needed more plays in oil too, so I added (SLB) Slummberger, which I consider to be the best internationally exposed of the oil drillers. I think the price is a bit high, but it can still go higher. I also added (STO) Strat Oil. I expect some stock price gains, but moreover, I expect a 4% dividend to be paid during this game period. They don't pay dividends by the quarter, like many companies, but more like annually. There is limited down side to this pick, but they do miss earnings periodically. I will gamble there is not going to be an earnings miss in the near term. They really got pounded for the last one.

The rest of my changes were to just add shares to existing picks. So far, some have been good additions, but some have not. I added 400 shares to DO and BHP, and 200 shares to IRBT.
I still maintain BHP is a great long term holding, as is DO. BHP is in the middle of a hostile takeover of RTP, and that is killing both stocks right now. BHP would go up, if they just walked away. Still, that may not be the best long term decision. I stick to my guns, and my faith in this company. DO had an earnings miss. Not a big miss, but the market is very unforgiving on those for the short term. Still I believe in the earnings growth I see for them, and think this will be an excellent pick for the long term also. I also think they will entertain the idea of a stock split later in the year. While a split does not increase value in the short term, more shares of a company that should maintain a growth mode, does make long term dollars and cents,,, and good common sense. IRBT is a gamble, and always was. I like the growth potential here, but it is too small of a company to say just when that turnaround may come. It is also in the technology sector, which has been a favorite whipping boy of the market lately. Still, despite it's drop lately, I did add 200 shares here. I will wait for a month or so, and re-evaluate that choice again later.

The rest of my load balancing has for the most part, worked out better. I added 200 shares to (KGC) Kinross Gold, as I needed the best of the gold miners. I added 200 shares each to (CMI) Cummins and (JOYG) Joy Global, both rising stars in industrials. And I added significantly more oil services with 300 shares of Smith International (SII) and 400 shares of Weatherford (WFT). I added 200 shares of (NOV) National Oilwell Varco, the premier of oil rig builders, and 600 shares of (RIG) TransOcean the deep water oil driller. Despite being in the red on my RIG pick, I have to believe it is still undervalued. And once the pains from the merger with Global Sante FE are absorbed, I expect them to come back with some benefits for the stock holders, in the form of increased dividends, and a stock split. Both of those actions may be after this particular game ends, but I got the stock for basically a steal. The 5% downturn I show on this one today, is just a growing pain, and I expect it to be back in the $140 range on stock price very soon.

Some disappointments I have my eye on are (CBI) Chicago Bridge and Iron, (TEX) Terex, and (MTW) Manitowoc. These are all in heavy construction, or suppliers of heavy construction equipment. Even industrial construction is being impacted by the housing construction crisis.
For right now, I am sticking with the fundamentals I see in these companies. I would even like to add positions to them, but the market is giving me no reason to do so right now.

I even have my eye on some of the banking sector, and specifically, some credit card companies. I just don't think the time is quite right to add them,,,,, yet.

In the next few weeks, I expect to add a few more stocks, and or positions, so that I am about 90% stocks, and 10% cash. That will relate to converting 10% cash to stocks. But, I am in no hurry. Lately, the downs have been more severe, and more frequent, than the ups in the market.
That is a fine reason to keep the cash on the sideline,,, for right now.. In general, I prefer to buy, and hold. If it was good enough to buy in the first place, it is good enough to hold, especially through a short term downturn.

Last year, Dryships had an incedible run up in it's stock price. I think they may have had to redesign some chart patterns to keep up with the near 1000% growth they accomplished in just a couple of months.

Personally, I never did own Dryships, but last year, I wish I had. Instead, I owned another shipping stock that did nearly as well, and that was TBSI. This one is not a current stock pick either, but it is a personal favorite, and well may be added later.

But, I do have three shipping stocks in this portfolio, and despite recent underperformance (but they are recovering), I still have faith in the shipping industry.

This is just my own personal opinion, of coarse, but I think the best management team in the industry goes to QMAR. They maintain one of the most modern fleets, but not the biggest by far. The thing against QMAR, is a very high debt level. And, it has been announced that QMAR will be merged with Excel Maritime. Excel got a heck of a deal in my opinion, if just in the management team they acquire in the merger, and in the longer term, I expect some good things from Excel. In the shorter term though, I will likely accept the $13 per share cash, and divest 50% of the Excel shares, until the growing pains of the merger are over. But, the QMAR philosophy, of share holders first, has made them a marvelous company to own stock in.

There are other good shipping companies too. Diana Shipping has taken a pounding lately, and it is in my portfolio today.This is another great management team, and the more than 5% dividend, shows they are concerned enough to make share holders happy. This was in addition to the more than 35% stock price growth they attained last year.. But three things have eroded most of that growth. First, the market as whole has taken a serious dive, and DSX got it's share of a hit there, right along with everyone else. Secondly, shipping is somewhat seasonal, and we are coming off of downturn months of that cycle, so I have some faith in some upcoming recovery. And lastly, has been the Chinese protest of shipping prices of iron ore. The Chinese can bouycott all they want, but it can not last indefinitely. The giant will fall to it's knees, and beg shippers to deliver the much needed ore, at most any price. And, I fully expect shippers to demand that price from them, in the near future. When they do, I will be giving serious thought to adding TBSI to this portfolio, as I do like their management, but compared to others in the industry, the TBSI yeild is just a little low compared to others in the industry, for the current risk of the market. But, both TBSI and DSX, in a good growth market, I expect will outperform the market as a whole. But, that is when the market is a little more risk tolerant, and it definitely is not right now. For now, I will stick with just the dividends on DSX, and hope for some stock price growth, that should follow in the coming months.

Another entry in this portfolio is ATW. I have not followed this one closely enough yet, but it has a near pristene balance sheet, and low debt made it worth the chance. That too says something about the management team, and I see that as a positive for this stock.

In short, you may have seen that I have based many of my decision on shipping stocks based on the management teams. I have not favored the management team of Dryships for some reason. I think they kind of blindly fell into the right spot, last year. The most recent acquistion of Dryships, was not more of what got them success last year, but a venture into to oil drilling. This is not showing me a great deal of dedication to their own industry. Now, I do not fault them for diversification, but I am not awarding them points for it right now either.

TBSI, GNK, EXM, and many other shippers, are actively increasing fleet sizes. Much less so with Dryships. Do they know something I don't? Well, I just don't see it that way. The time it takes to build new ships, well, I expect market demand to well exceed shipping capacity through at least 2011.

Do I like the shipping industry. ABSOLUTELY! But, it has taken a beating lately, and more than once I have been tempted to "jump ship". But, in the end, I still have to believe, "the water is just fine, c'mon in". Bulk up (drybulk) NOW, and enjoy the seasonal uptrend in stock prices that go with it, and consider a partial pullback, in maybe October.

But, I think there are better plays in the industry than Dryships. They will do OK too, but I far prefer DSX, TBSI, GNK and some others. I see hope for ATW, and yes EXM, in time. And, I will be sorry to see QMAR go, as I take my checks to the bank!

One unrelated item I must mention. I have been doing some load balancing on my portfolio, which included adding to some positions, and adding a few new stocks along the way. A lot of it is just getting this portfolio compliant, as it is a first time setup for me. But, in a few days, I will be updating those changes in this blog.

On the whole, the portfolio is a little down right now. I am not playing this as a game exactly, but more as a long term money manager. I think the dividends should hold me at par, or better in a rough market, like we have now. If the market gets over it's current attitude problem, I have some stocks in this portfolio that could do some fantastic growth runs too. For now, I think I have reasonable, but not excessive, diversity. In the end, I think I will still be competive. I may ride a few sectors (oil, gold and minerals, industrials, and yes, shipping are my favorites right now), but will not ride just a few stocks just to win a game. There just are not many "rockets" in the market right now, so we will hope we can get started with some "firecrackers", and build them into rockets as we go.