don barrett

Where Do We Go From Here?

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My first post on Strategy Lab Open was to find your style of investing and stay with what you believe. I still think a lot of average people with a little time to study and actually follow the market can beat most of the professionals and the Open has shown that to be correct again. I have seen several fund managers lately on CNBC hyping some stocks and their fund is down double digits for the year They make me want to run right out and get some cash for them to manage. And that was my main reason for doing as poorly as I did. I let to many people who have no clue what their talking about influence my decisions. If you look at my stock picks they have done fairly well,but I jumped in and out too much and completely changed my portfolio twice. I started a short fund and as of today it stands at almost $1,600,000 which would put me in second place if I get to count it in the Open. A lot of people and many on the media keep asking when do we buy the financial stocks and go look at my CFI fund and see if you think it's time to jump in. I was up 44% I think it was in June by shorting banks and brokers and my advise is to not touch the financials anytime soon!
Oil was another of my pet peeves this year. The media kept telling us as Americans we weren't cutting back on oil usage and I didn't believe a word of it. I'm not wealthy by any means but when oil hit $3 or so I cut back on my driving. And now we're at $4 and until the last few days we were told oil usage still wasn't slowing. And in the last few days I first heard or at least the first time I remember hearing "demand destruction" I didn't coin a term for it but I did say at different times during the Open that the oil consumption was dropping and it was in a bubble. Oil has dropped $10 or so the last couple of days and I think this trend will continue. One last little bit of info. on oil is that I heard yesterday that 3% of all cars on the road are hybrid. It's a small percentage but we have to start somewhere.
Another of my favorite sectors is the fertilizer companies. I personally like C F Holdings which is trading at a current PE of about 18 and this company has tremendous growth and the bottom line is people have to eat. Some of the ag companies dropped yesterday as oil did and why I have no clue. Falling energy prices have to help all these companies and CF rebounded today over $7 dollars or over 5%. These ag companies do a lot of international business and they will do better as the worlds population increases.
My next favorite is the other black gold-coal. A lot of people are trying to associate coal with oil and they are almost two complete different areas. Most oil is used as gas and most of coal is used for generating electricity. I'm hoping coal will play a bigger part in fueling our vehicles as the technology for converting coal to a liquid fuel is really improving. South Africa is fueling about 30% of their gas needs with liquified coal now.
Now for a couple of sectors I wouldn't touch right now. The U.S. auto makers are in a terrible position and I don't think they can turn things around anytime soon. I guess it has been a couple of months since I addressed the American auto makers and at that time Mr. Kerkorian had made a substantial investment in GM and Ford and those have been terrible investments so far.
Also,the banks and brokerages are not out of the woods yet. As I stated earlier my short fund was up about 44% in June mostly on banks and brokerage houses. Some of these companies are going to need more cash infusions and I'm hoping by the early part of 2009 things in the financials will turn around. Some of the financials made a nice move up Tuesday and fell back and some actually lost more ground Wednesday.
Another sector with some serious problems ahead are Freddie and Fannie. When the subprime debacle was in freefall these government agencies were buying up a lot of the bad loans from the private mortgage companies and then they even raised the loan limit to about $800,000. From what I can find out they have bundles of loans that have no borrower verification on income or employment. If you think back 2 or 3 weeks ago Dodd and some others were wanting a $300 billion housing bailout and when the news came out that Dodd was getting some interest rate cuts and other perks and I haven't heard anything about the bailout since. Tuesday it was announced Freddie and Fannie would need more cash injections ,but that idea was denounced and their stocks still dropped.
Overall I think things will slowly rebound and the economy will survive. As I said earlier this is nothing compared to the recessions we have had in the past and we will get past this slow down. If oil and the other commodities continue to pull back things will turn around much quicker. So,stick with what you think and don't let the media influence your decisions as they know less about the economy than you do.