Per Jack Crooks, one of the article's writers, "When a crisis shows up anywhere in the world, investors have traditionally rushed to the relative safety of the Swiss franc because of Switzerland's role as a safe haven in a time of turmoil.... Plus, the Swiss central bank still has a very large reserve of gold relative to other major countries in the world. But the clincher is the Swiss carry trade.... Step 1. Investors borrow Swiss francs at very low interest rates. Step 2. They convert the Swiss francs into U.S. dollars, British pounds and other currencies. Step 3. They take that money and buy high-yielding, riskier investments. That's what's called the Swiss franc carry trade. Now, let me show you what's likely to happen next ... First, the risky investments start going sour -- because real estate is collapsing, or stocks are falling, or banks are failing, or some combination. Second, these investors get scared. They suddenly want to get rid of their riskier investments. So they sell. Third, they rush to buy back Swiss franc to repay their loans. And when they rush to buy Swiss francs, naturally, they drive up the value of the Swiss franc."

Looking at the early market figures, I saw stocks were up and FXF was down again (as were other bear ETFs) so I bought it back, with the intent of holding it longer-term this time.

When the market resumes the bear trend and my ETFs go too far up again, I'll have to decide where to trim in order to stay under 25%. But I can put off that decision for now. With StragegyLabOpen 2 at an end, I can take a little more time and concentrate on optimizing the fund for longer-term performance at Marketocracy.

2. ETFs are useful when I dont know enough about an industry or a country to be confident picking the best stock in that field. In addition, I can sometimes pick a good foreign stock by looking at the companies the ETF is invested in.

3. Short ETFs are great! For someone not sophisticated enough to be able to short effectively (like me) short ETFs are the way to go in a bear market.

4. Unlike a thinly traded microcap, with a larger company you really can, to a certain extent, make a prediction about its upcoming stock direction from the record of the market's past movement in it. Many thanks for Jim Van Meerten for getting me started on the right path for this.

5. To make the most money possible in a bear market one needs to be able to take advantage of the short bull rallies. This means being very nimble, changing strategies and being good at technical analysis. Easier said than done. I should practice this, maybe with a separate "throw-away" Marketocracy fund. However, right now my main fund does better when I stick with my longer-term, bear-market bets and grit my teeth until the market goes back down again.

As of this moment my fund is up a bit, while the major indices are down.

During the course of the contest I've learned that I'm not very good (yet) at short- medium-term trading; however, for the first time these tweaks have actually paid off (so far).

Yes, the Rockies really do still have a lot of gold. Unfortunately it is mixed in with a lot of dirt. A Google search will net you surface mining equipment including modern, automated pans and sluices. A panning vacation can be a fun family outing for Denverites and a good lesson in economics for the kids. You can catch a few, pretty bits to float in a vial of water as a souvenir. But will your efforts pay for the gas it took to drive to the mountains? Nope.

As for oil shale, this is a Colorado "resource" that has been around for a long time; however extracting the oil costs more energy and dollars than you will get out of it, even with today's prices. In 1982 Exxon cancelled its $5 billion Colony Shale Oil Project near Parachute, Colorado turning the new community into a ghost town overnight. Per an article on the Web, in response to this the US government terminated the subsidies they had been pouring into development of this technology. According to local gossip it was the other way around: the whole thing was a boondoggle and, when it became obvious the government would soon quit throwing good money after bad, Exxon pulled out.

Today, Royal Dutch Shell (RYDAF.PK) says they have a new technique that may eventually convert shale to petroleum at a cost of only about $30/barrel. A "Fortune Magazine" article described their process as follows: "Shell drills 1,800-foot wells and into them inserts heating rods that raise the temperature of the oil shale to 650 degrees Fahrenheit. To keep the oil from escaping into the ground water, the heater wells are ringed by freeze walls created by coolant piped deep into the ground; this freezes the rock and water on the perimeter of the drill site. Eventually the heat begins to transform the kerogen (the fossil fuel embedded in the shale) into oil and natural gas. After the natural gas is separated, the oil is piped to a refinery to be converted into gasoline and other products." The frozen "wall" is meant to keep oil from seeping into the local water.

Speaking of water, the process will also require a lot of it. The Fortune article says, "...some of the water it intends to utilize will be salinated water pumped from deep aquifers that are not part of the conventional water supply." And where will the rest come from? We are talking about high, arid mountains not that far from the Continental divide! There's not that much local water to begin with and our downstream agriculture needs every drop we can collect.

Has Shell really taken into account adequate budgeting for environmental remediation? Especially if, after the decades necessary to develop the project, their idea doesn't work well enough to be profitable? If they abandon the project what happens to all that salinated water in the "wall"?

If Shell wants to spend their own money (not my tax dollars) on a humongous, experimental project which sounds really wacko, that would be OK with me if only I could be sure my state's economy and environment would not ultimately get clobbered. Many Coloradoans are understandably skeptical and are opposed to the US government allowing Shell access to the national land they want.

Colorado also has a lot of wind and sun which we are developing into energy sources. It's true that wind and solar technologies, also in early stages, will take decades to develop into an energy backbone. The question is where do we encourage our economy to expand and where do we put our investment dollars? There is only so much R&D money to go around. Personally, I'd prefer oil investment go to underwater drilling such as the new Brazillian underwater oil fields. Although underwater oil takes time and effort to access, it looks much less iffy than oil shale. The US should develop nuclear, like much of the rest of the world. Plus we should spend more effort on sun, wind and perhaps algae. The strength of this country has always been in innovation. We need to once again become leaders in SOMETHING the entire world wants and new energy technology will be in demand for quite a while.

Heico, which describes itself as an "aerospace, defense and electronics company", did relatively OK in the bear market until a recent, huge, unexplained stock plunge. Although they issued guidance for '08 indicating they'd be slightly below analysts' expectations, there was no really bad news that I could see. On the contrary, the quarterly EPS was up from this time last year. Well, the decline could be part of the general airline industry sector drop.

Basically, this company makes discount, brand-knockoff, airplane parts. As the Wal-Mart of the aircraft industry I think it should do well in coming months. Airlines will be looking for the cheapest parts they can get. They'll refurbish old planes instead of buying new. When they sell off some of their fleet at bargain prices the new owners will want to renovate inexpensively.

Nevertheless, the stock is down.

Heico, which describes itself as an "aerospace, defense and electronics company", did relatively OK in the bear market until a recent, huge, unexplained stock plunge. Although they issued guidance for '08 indicating they'd be slightly below analysts' expectations, there was no really bad news that I could see. On the contrary, the quarterly EPS was up from this time last year. Well, the decline could be part of the general airline industry sector drop.

Basically, this company makes discount, brand-knockoff, airplane parts. As the Wal-Mart of the aircraft industry I think it should do well in coming months. Airlines will be looking for the cheapest parts they can get. They'll refurbish old planes instead of buying new. When they sell off some of their fleet at bargain prices the new owners will want to renovate inexpensively.

Nevertheless, the stock is down.

SLO FUND SUMMARY

Sells

FXI iShares FTSE/Xinhua China 25 Index Fund - I still like this ETF, but wanted to use all my ETF allocation for short ETFs.
UN Unilever - Located in the Netherlands, this was one of my "food" plays. However it has not been doing well lately.
VE Veolia Environnement - one of the few "water" stocks I found but not doing so well in spite of that fact. I am hard put to find another water stock to replace it with.
IVGN Invitrogen (biotech) The company has many ups and downs depending on recent news. At the moment it's down; so sold out of the SLO fund. But kept it in my MagicMicroCaps fund because I still find it more promising than other Micros in this economy.
SNY Sanofi-Aventis (biotech) With disappointing news the stock keeps going down.
HDB HDFC Bank (India) - stock not doing so well lately and investors are hesitant about banks worldwide.
CHL China Mobile - still a leader in its field but it looks like China is encouraging additional, smaller companies to compete with it.

Buys

CASY Casey's General Stores, DLTR Dollar Tree and BIG Big Lots are retail bets for our changing times. I found DLTR and BIG when researching competitors to WMT but did not discover CASY until I read the Question of the Week.
GFI Gold Fields Ltd. (another gold company) and QID ProShares UltraShort QQQ (another short ETF). As you can see I am betting on the dollar and the economy to continue downward.
PBR Petroleo Brasileiro S.A. This is a stock I'd sold earlier but which continued to go up. Long term, I believe Brazil is a good oil bet so I bought it again. Should never have sold!
GGB Gerdau This is another stock that I'd sold earlier. I bought more of this Brazilian steel company at current pricing when Brazil said it will give preference to companies in its own country when building the additional equipment necessary to exploit the new underwater oil it has found.
BUCY Bucyrus Int'l. This company produces mining equipment for the extraction of coal, copper, oil sands, iron ore, and other minerals. I think it should do well with our desperate search for more energy.
TTES T-3 Energy Services With products for oil and gas wells, TTES is a another bet on the need for more energy. I already had this company in my MagicMicroCaps Fund and now bought some for the SLO Fund.

--------------------------------

MAGICMICROCAPS FUND SUMMARY

Sells:

On April 18 I sold INX Inc. (INXI) because it had fallen steadily for the past 12 months. This was really bad timing! In May the company announced good news and the stock surged up again.

I'd bought Northern Technology Int'l. (ticker NTI, soon to be NTIC), in April for $7.07. Sold it May 6 at $7.56 when it took a sudden surge upward. Boy, was this another case of bad timing! Later in May there was an additional, unexplained, huge increase. Then, in June, the company announced they'd been approved for trading on NASDAQ.

I sold a couple of stocks I'd held for a long time. But it is time to let them go:
LTFD - Some people say that bingo does OK during recessions. But I think not as a stock because investors will believe all recreation is down.
TSCM TheStreet.com - This stock has done well for me but I believe it will now be flatter due to increased competition from sites such as SeekingAlpha.com.

When a company has bad news, when it is in an unpromising industry for our troubled times, when it is down for the past 12 months or when the stock falls without apparent reason I try to sell quickly. So I also said goodbye to:
BOLT - Bolt Technology, HMSY - HMS Holdings, TRGT - Targacept, ZONS - Zones Inc.

Happier sells were those which occured when I sold half because the stock had risen 100% This a general policy I try to stick to. The companies are:
GHM - Graham Corp. and JST - Jinpan Int'l.

Buys

As usual in this bear market, I have a hard time finding good microcaps to buy in order to use up the large amount of cash which keeps accumulating due to sells. However I've found a few:
SEED - Origin Agritech Ltd. (Chinese company, hybrid crop seeds). Thanks to Vijay Gondhalekar for mentioning SEED in his SLO blog.
ATAI - ATA, Inc. ADR (computer-based testing services in China)
EXK - Endeavour Silver Corp. (Canadian company operating in Mexico)
CPSL - China Precision Steel (Chinese company, high precision cold-rolled steel products)
AFOP - Alliance Fiber Optic - It's almost time for my "annual review" of this company. As the stock has fallen, I looked at it with the prospect of selling what I already had. However, I took a real gamble and bought more. It is marketing internationally and its revenues just keep growing. It is profitable, has lots of cash, and stock is really bargain priced. Of course some shareholders may know something I don't or totally irrational buying and selling could send the price lower. That's the problem with microcaps.

That's about it for now. On a last, encouraging note for my SLO fund, the market is going down again today. I am betting on an overall bear market for the rest of 2008 and at least part of 2009 and have tried to optimize for this. On a really bad market day my fund goes down too; however it often happens that other people go down more.

I'd like to compare Casey's with 7-Eleven but unfortunately the latter is private. Looking at "Competitors" in Yahoo and Google finance, larger companies such as Kroger, Safeway and Winn-Dixie are listed. IMHO that is comparing apples to oranges because the customers are different. A few years ago, I read an article about convenience stores that said most of the food products sold there were consumed minutes after being bought. It is the store of preference for laborers who need to fill up the truck with gas and fill up themselves with food as quickly as possible between tasks. I can confirm this because my boss owns both the investor relations firm I work for and also a small landscaping/snow-removal company. The company credit cards are used for gas and food-on-job.

Casey's offers a MasterCard, with no annual fee, good for rebates on everything but higher on items bought at Casey's (including gas). If they were in this area, would my boss get the card and mandate using Casey's? 7-Eleven recently introduced a credit card but offers no details on their Website about possible savings when buying their products. In 7-Eleven's favor, they sell money orders and prepaid phone cards, including an international one. Unfortunately they don't give details on long-distance rates; however if they have exceptionally good rates to Mexico that is another point in 7-Eleven's favor as a competitor. The biggest question is where the customer can get the most bang for the buck.

Casey's is somewhat different from other convenience stores per the company description at Reuters. "The Company's General Stores seek to meet the needs of residents of small towns by combining features of both general store and convenience store operations.... Each Casey's General Store typically carries over 3,000 food and nonfood items. The products offered are those found in a supermarket, except that the stores do not sell produce or fresh meats and selection is limited to one or two well-known brands of each item stocked."

This looks like a good niche to me. When the landscapers I mentioned did a job in the mountains last summer they barely broke even due to costs. They had the choice of spending an arm and a leg eating at higher-priced tourist restaurants or spending a lot on gas to get to a grocery store. (Better planning would have helped, of course; however, being used to city and suburbs, they were surprised by the rural environment.) Hometown Mom and Pop stores have disappeared because they cannot compete in pricing. In spite of gas costs, rural residents will save money driving to the supermarket in the nearest large town. Although with rising oil prices this may no longer be true, the Mom and Pops are long gone! I am betting that Casey's has the right idea at the right time. Of course competition will move in but Casey's has a good head start.

American Public Education, Inc. (APEI) and Capella Education Co. (CPLA) have been public only a short time and are in the education sector (which I expect to do OK during the current recession). APEI is especially interesting. It provides online post-secondary education to the military and public service communities in the United States. Thus, not only is it profiting from the current war but is in an excellent position to give veterans supplementary training to transition them into the private sector when they leave the service.

Teck Cominco Ltd. (TCK) is a Canadian mining company with operations in several parts of the world. It produces copper, zinc, metallurgical coal, gold, molybdenum, lead, indium, and germanium, and owns interest in oil sands development assets. In other words it has practically every rare metal everyone wants. I found it thanks to "the_barnacle" in the Marketocracy forums who posted a list of "the top picks for each metal sector". I don't know how he screened for "the top" but the list was a good starting point.

Mindray Medical Int'l. (MR) is a Chinese company which makes numerous, sophisticated medical devices. If you own a US or European company with similar products, watch out! It's hard to see how others can compete.

ABB Ltd. (ABB) is a Swiss company which provides power and automation technologies to utility and industry customers worldwide. Whether a country continues with petroleum, prefers nuclear, develops wind and solar or finds an entirely new source of energy, ABB will supply their needs.

So once again I have very little cash. I may kick myself when the next big bear swing begins; however I seem to do better if I grab a promising company when I see it and hold on.

On an encouraging note, the prolonged bear rally in stocks has inspired businesses to hang in there. The government has stepped up to start badly needed reforms in financial regulations. This has mitigated the situation and given us time to adjust to tougher circumstances. Therefore I don't anticipate a full-fledged depression.

With any luck by the summer of 2009 we will be in position for a decent home buying season and before the end of 2009 will have started to pull out of recession.

However I don't foresee another big, expanding economy and a huge, long bull market for quite a while. Our banking/credit system has a long way to go before it is really healthy again. Plus, I am guessing inflation will continue to be a problem. Most importantly, the US is no longer the controlling top dog in the world. Having just started to read Fareed Zakharia's "The Post United States World", I am looking forward to his ideas on how the US can participate and prosper in a more equal global economy. Naturally this will require adjustments.

If this recession and bear market have a silver lining, it is that it has caused us to more quickly come to grips with our changing world. Of course for several years job-seekers have been aware that more and more positions are being outsourced. Stock traders have become increasingly aware of interesting foreign companies they want to invest in. I had thought that 2007 was the year that ALL members of the active investing community had shifted to the view that we are now operating in a new, challenging, truly global economy. But from the impressions that Jamie Duglosh wrote about after he came back from the Money Show, it looks like some still believe in easy money from the US markets.

In any case, IMHO 2008 is the year that the rest of the US becomes aware of the challenges (and opportunities) involved in globalization.

Today I was astonished to see that my buyback order for Cleveland Cliffs (CLF) had been filled even though I despaired of this stock ever sinking to the level of my limit order. What happened?

It split! It split!

So of course my buyback strategy "worked". Sort of. I just bought back at my lower price, it is true, but in a sense I got only half the value planned. In a way. They say that when a good stock splits it tends to rise right back up to pre-split prices. Maybe this will still turn out to be really profitable in the long run. But if I do the math I may find I would have done better not to sell in the first place.

Of course their software features many screening criteria based on CAPS ratings.

Under "CAPS Rating" you can choose up to 3 different dates of CAPS ratings (e.g. "4 to 5 stars on 2008-3-15" and "2 to 3 stars on 2007-11-1"), select a date, and choose Rated between: All Ratings 1 Star 2 Stars 3 Stars 4 Stars 5 Stars and All Ratings 1 Star 2 Stars 3 Stars 4 Stars 5 Stars.

Under "CAPS Picks" it lets you choose Min. and Max for:
Active Picks
Outperform Picks
Underperform Picks
All-Star Picks
All-Star Outperform Picks
All Star Underperform Picks
Wall Street Picks
Wall Street Outperforms
Wall Street Underperforms

You do not have to choose any CAPS rating criteria if you want to rely solely on your own choices. The screener also gives you extensive price and fundamentals criteria. I should note that although the database includes Microcaps, few are available for CAPS ratings; therefore if smaller companies are your focus you need to skip the above CAPS criteria.

Under Company Information the screener lets you choose Sector, Industry and Market Cap.

Under Price Data Min Max it lets you choose Min. and Max for:
Current Price
% Above 12 Month Low
% Below 12 Month High
4 Week Price Change %
13 Week Price Change %
26 Week Price Change %
52 Week Price Change %
3 Month Avg. Daily Volume
Price-to-Earnings (TTM)
Price-to-Sales (TTM)
Price-to-Book (TTM)

Under Risk Data Min Max it lets you choose Min. and Max for:
Beta (3 year)
LT Debt-to-Equity Ratio
Current Ratio
% Insider Ownership
% Institutional Ownership
Current Month Short Interest

Under Revenue & Earnings Data it lets you choose Min. and Max for:
Current Dividend Yield %
Revenue (MRQ)
Cash Per Share
Earnings Per Share
Dividends Per Share
Sales Per Share
EPS Growth Rate (last 3 Yrs)
Rev. Growth Rate (last 3 Yrs)
Gross Margin
Return on Equity (TTM)

As for the results, it gives you both a Key Stats View and a Screener Criteria view. Moreover, it lets you download the results to a spreadsheet.

At the moment, the only big drawback to this screener is the fact that it is easy to inadvertently choose criteria which eliminate all of the stocks in the database. You don't discover this fact until you click the "Search Now" button. This is a common problem with screeners and one which, hopefully, will be solved by the time Motley Fool takes this software out of Beta.

When you click on a criterium you can add a minimum and a maximum. If you are not sure what min. or max. to add, a Company Distribution chart with sliders helps you chose those figures. Another nice touch -- Google also shows you the definition in case you are not sure of it.

You can choose to screen on a list of specific sectors (or screen on all) and if you wish you can choose only AMEX, NASDAQ or NYSE.

As you add each criterium, the list of companies meeting your screen appears below (in groups of 20) along with their figures for the criteria you have chosen. You can see the number of companies remaining as you add each criterium. This is especially helpful because when using any screener it is easy to inadvertently choose criteria which eliminate most or all of them.

I was delighted to find that, unlike many databases, Google's screener has figures for microcaps as well as for larger companies.

I do wish Google would add the ability to download all the resulting data into Excel; however my usual copy and paste into notepad works OK.

All in all, this is a very useful tool.

Next time I'll review the Motley Fool's new screener.