Bookkeeping: Weekly Changes to Fund Positions Week 12

Week 12 Major Position Changes

Fund positions of 1.0% or greater can be found each week in the right margin of the blog, under the label cloud and recent comments areas; I highlight weekly the larger position changes.

Being a long only fund, via Marketocracy rules, the only hedges to the downside I have are cash or buying short ETFs.

To see historic weekly fund changes click here OR the label at the bottom of this entry entitled 'fund positions'.

Cash: 7.5% (vs 5.8% last week)
48 long bias: 84.5% (vs 86.9% last week)
4 short bias: 8.0% (vs 7.3% last week)

52 positions (vs 57 last week)
Additions: UltraShort Oil & Gas (DUG)
Removals: Broadcom (BRCM), Bolt Technology (BTJ), Juniper Networks (JNPR), Garmin (GRMN), Trina Solar (TSL), Tata Motors (TTM)

Top 10 positions = 35.0% of fund (vs 31.9% last week)
40 of the 52 positions are at least 1% of the fund's overall holdings (76.9%)

Major changes and weekly thoughts
Entering this week I had a relatively low short ETF exposure and relatively low cash exposure as I had been selling the short ETFs into last Friday's heavy 'emotional' selling and trying to pick through the rubble for new long exposure. With Monday a down day I continued this tact and quickly began running out of cash. Going into Apple's call on Monday night which one knew would be tremendous I wanted to be on the long side. So we had a decent bounce Tuesday but Tuesday and Wednesday were chopping and by mid afternoon Wednesday I was at my lowest short ETF position in months, and out of cash so extremely positioned on the long side. If you look at a monthly chart for the S&P 500 you can see we were testing lows of last Friday mid afternoon Wednesday and a break of that level would of led to a significant downside. It was strange how we sat at that level for literally a few hours, not budging. Then out of the blue came a large futures order (most of my positions did not move up, just the averages) but that slowly led to more buying. Seems like a strange coincidence.... Friday was a mostly up day but the indexes were still a bit misleading as Microsoft is a major part of every index and its weight alone pushed them up more than the 'average' stock.

Specifically to the fund, I kept building my fertilizer and agriculture exposure. We had a great report from CNH Global (CNH), an agricultural equipment maker early in the week and then a very good Potash (POT) report later in the week which would of been even better if not for the strong Canadian dollar and tax issues. However, this is one of the few areas where I see pricing power and visibility in a slowing US (and potentially global) economy. I keep saying, once the genie is out of the bag and people move up in living standards and want to eat better, thats not something that will change if China's GDP dips to 8% or 5% (or India). Meanwhile a slowdown in those economies could hurt the mining companies (which have been commodity favorites) much harder - hence my overweight to agriculture for the months (quarters ?) ahead. Coal was also strong this week, and I lightened up on my positions a bit late in the week. India also had a late week surge. On the negative side was networking stocks which stunk up the joint. Top 5 position Blue Coat Systems (BCSI) which had hit my year target of $50, has been whacked nearly 27% in 7 sessions, even though it has done nothing wrong, other than being associated in a sector with some blowups. One of the guilty parties was Riverbed Technology (RVBD) which was a sub 2% position which I added to as the week went by. Two other >20% losers which I had sub 2% positions in, were Cummins Engine (CMI) and NII Holdings (NIHD) - I felt both sell offs were overreactions and have built both positions up. These won't rebound immediately but in time these stocks will show their worth, I believe. They were held by too many hot money momentum investors and hopefully now the change of character in their investing base to "good growth at decent value" will lend to some stability. That said, if any of these show another bad quarter they will get blasted even harder the next time around.

Going forward I remain cautious as the US economy is heading, if not to recession, something very close to it, in my opinion. And I'm not the only one thinking that way - some smart cookies like Jim Rogers and Julian Robertson are also of like mind. As I mentioned last week, now the question is how much the world economy's will be affected. And if western Europe follows us down this path to slowing growth (which it will), will this finally be the driver to slow down emerging markets? Another interesting factoid - I am curious why gas prices are not rising - gas is around $3.00 locally - but it was $3.00 back when crude was in the low $70s as well. The refiners have been taking it on the chin as they have not raised gasoline prices in the face of much more expensive input (crude oil) - why is that? Strange to see. How much longer will they keep that up? Their margins are paper thin as it is - what happens at oil $100? What would $4.00 gasoline do? Many energy stocks related to crude have not reacted much in the past few weeks as crude pushes from low $80s to low $90s so that strikes my curiosity - what is that telling us.

As for the Fed, well we all know they are in full bailout mode, as the assure us they are not. Liquidity being created, which I assume is in large part of the reason the market seems to levitate in the fact of unending bad news in 70% of it's stocks. Transports looking week, financials pathetic, homebuilder - haha, retailers awful, restaurants weakening, and now industrials showing weakness - even the multinationals. Yet we continue rebounding. I still think its basic supply and demand - so many large stock buybacks with companies flush with cash, and so much more worthless dollars being printed and handed out, it needs to find a home somewhere (and I guess real estate is out for a few years). So it's a tough market to call. However going into this week, my expectations are 110% of a cut, as I have been saying since Ben showed his true character 6 weeks ago (no different from easy Al), and I am now leaning to a 50 basis point cut (40% chance). This will devalue dollar further, push commodities up further (including oil), inflation continues to ramp, and the pattern continues. I have been calling for 4% Fed funds by very early 08 and I stick to it. But when does the market stop cheering these cuts, and ask why exactly we need such strong action when everything is in such good shape as government officials continue to tell us. So it is tough to be bullish on the market as a whole, but being a long mutual fund I need to find areas that will provide the safest harbors. I think shorts are shell shocked from the Fed's recent actions so I don't expect much shorting into the action - everyone now expects when Ben moves the markets pop - since the market likes to do what people least expect, its very possible we get the opposite reaction this time; especially with the short sellers adding fuel to the fire with forced buying. I think (from my reading) and my own experience many 'intellectual' shorts who are against the market due to 'logic' have thrown in the towel and think there are many forces working together to keep this market up no matter what bad news comes down the pike - so after being burned repeatedly they will wait for true weakness to re-short and not position themselves badly (yet again) of a proactive Fed strike. That's just my view on it. The market will fall when we least expect it. (i.e. potentially in the fact of yet another 50 basis point cut which had bailed out bulls in the past?) So I remain at the party, with many others, wondering why it continues, but stuck here for now, knowing good times must eventually end... the piper must be paid eventually.

Below are the fund changes this week - the specific rationale for each of these major moves is explained in the weekly posts which can be accessed in the left margin under archives.

Some of the larger changes (chronologically) to the fund below:

1. In the selloff Monday, following Friday's large dip (Early Bird Special) I added to CGGVertias (CGV), Core Laboratories (CLB), CF Industries (CF), New Oriental Education (EDU), Crocs (CROX), Sterlite Industries (SLT), Consol Energy (CNX), Ctrip.com (CTRP), Foster Wheeler (FWLT), and Jacobs Engineering (JEC) - all were down heavily except for coal play Consol Energy which had fallen a lot on Friday but I had missed the move down, so I bought Monday instead. Most of the buys were in the $5000-$7000 range execpt for fertilizer play CF Industries which I had bought about $18K worth in the $74s and $75s - CF had peaked at $89 by Friday so at its best these purchases had returned nearly 20% in a week.
2. I closed a smaller position in Broadcom (BRCM) which promptly tanked the next day on earnings (whew!) and cut back on iShares Hong Kong (EWH) which just continued upward later in the week.
3. LDK Solar (LDK) was up 16% to the low $41s so I cut back my position, and funneled the money into Mosaic (MOS) which was below $60 at the time (later in the week almost hit $70) - good tradeoff there.
4. Sold down some Garmin (GRMN) and added some Apple (AAPL) ahead of earnings as the stock would not sell off and give me a better entry point; along with Potash (POT) - and sold down some of my short ETF positions ahead of the Apple report. Monday was a busy day.
5. CNH Global (CNH) reported a great quarter, was up 12% - so I took some profits in a disciplined manner, along with Apple (AAPL) which had jumped off its earnings report, more LDK Solar (LDK), and some Indian exposure.
6. I also felt I was overexposed to energy after doing a self analysis of the portfolio, so I cut back on some deep sea oil drilling exposure along with Core Laboratories (CLB) which had bounced in a day from $120 to $130.
7. I closed my position in recently re-opened Bolt Technology (BTJ) - this proved to be foolish as the stock promptly tagged on 15% - you mock me BTJ, you mock me....
8. I started a smaller type of position in UltraShort Oil & Gas (DUG) - this is supposed to be a hedge again my energy positions, i.e. if crude falls it should go up as it holds a lot of exploration companies. So far it's worked against me. If oil does get to $100 I do plan to increase this position as assets tend to sell of when they hit a psychological barrier the first time. Either way, I am net very long energy so this can (hopefully) be a small offset to that exposure. So far a losing position.
9. I continued to add to the smallest of the 3 fertilizer positions, Potash (POT) ahead of its earnings. Also added some more Consol Energy (CNX) below $50 and sold some National Oilwell Varco (NOV) since it had run up north of $74.
10. Wednesday, after Riverbed Technology (RVBD) imploded the night before, I began rebuilding (too soon) my position with some smaller buys in the $36s. I outlined my thoughts on where to place future buy orders in the sector here. Catching falling knives is never easy, so remaining patient is the key - layer in, in pieces.
11. Both CNH Global (CNH) and National Oilwell Varco (NOV) pulled back after great earnings reports so I took the opportunity to buy back some of the positions I had let go earlier in the week - thank you Mr. market.
12. What can I say, I kept adding CF Industries (CF) as it showed no sign of letting down despite a (at that point) scary market.
13. Cummins Engine (CMI) and NII Holdings (NIHD) imploded Thursday, so I began rebuilding these positions - I was out of cash at this point so sold some short ETFs, some some Core Laboratories (CLB) and sold some sleepy Diamond Hill Investment Group (DHIL). I later added more Cummins Engine in the mid $100s.
    
14. I closed the remnants of the Trina Solar (TSL) position - with so many bargains appearing in other sectors, I needed cash. Plus, Trina has just not participated with the rest of the sector as most stocks in the group have been on fire; even sleepy Suntech Power (STP) had a 15% gain in 1 day this week. It is just not acting like a stock ready to post blowout earnings - something seems amiss. Hence I'd rather be safe, than sorry and will re-assess post earnings.
15. I started to rebuild my Blue Coat Systems (BCSI) as the stock had cratered down to lower $40s; I was hoping it would hold its 50 day moving average of $40, but it fell through that Friday - normally I would not keep catching a falling knife but I did add more Friday in the upper $30s as well. Technically, the stock could be in trouble if it doesn't rebound quickly back above $40. We shall see how this one plays out. I still like the valuation proposal, and I think much of the expectation has been kicked out of the stock this week with the poor stock performance of some peers. That's the theory anyhow and I am sticking to it.
16. I missed the early morning pullback in Potash (POT) since I was not at the computer (when it dipped below $100) so instead as the day progressed and Mosaic (MOS) fell back to $60 I got more Mosaic instead - this proved fruitful as both stocks reversed hard in a few hours and we had some interesting news on a potential mine issue from Russia which will provide even better prices for their products - in fact Potash has suspended pricing of new sales until we get further news. Mosaic hit nearly $70 the next day so I had to take some off the table.
    
17. In my theme of reducing dependence on oil related stocks and to raise some cash to redeploy into hard hit sectors I did take some off the table in Atwood Oceanics (ATW), a deep sea oil driller.
18. Friday, I sold some of my refiner Frontier Oil (FTO) on news of Kerkorian going after one of its competitors. I am a bit confused by this sector - with oil >$90, why they are not raising prices is beyond me. This has crushed margins in the sector - so eventually something must give. If the refiners raise prices I'd be jumping back in as their margins will improve but thus far they have not been doing it. Not sure why.
19. I closed smaller positions in Juniper Networks (JNPR), and Garmin (GRMN), for reasons outlined in each entry.
20. I closed Tata Motors (TTM) as I want to keep my focus in the India stocks on companies that will be least affected by the strong currency. These stocks had a great week.
21. Coal also had a great week so I trimmed a bit of my Consol Energy (CNX) - with only 4% exposure now in this space I won't be trimming any further, and look to rebuy on pullbacks in the names.
22. I bought back some UltraShort ETF exposure late in the day on Friday.
    

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Overall - there were a lot of transactions and the 2% move in the general market indices belied a VERY volatile week - many stocks in the portfolio were up/down 10-20%. So when the opportunities were created to buy low, I did - and when some of these literally reversed on a time 24-72 hours later, I took some off the table. This keeps with my strategy of always keeping a reasonable sized core in positions I like, but lowering and increasing exposure as the market gives/takes away on the prices. I did tidy up the portfolio and 48 long positions is the smallest since probably week 2 of the fund. The markets have been very volatile intraday of late and it has been tiring to watch this huge swings - unfortunately we might have yet another one next week with the Fed meeting - I'd prefer nice even keel moves but the ability to find some nice trades this week led to some nice sized short term gains so I took them when offered.

Bookkeeping: 'Rising Tide' Performance Week 12

Week 12 performance of the mutual fund

Comments: With 1 week to go until (my) quarter 1 closes, it was an interesting week of earnings. After the indexes I follow fell roughly 4% last week, they made back more than half of that loss this week, helped on Friday by Microsoft (MSFT). To be blunt we stood at the abyss Tuesday, as the market was testing Friday's lows mid day - technically a break of that level would of lead to a much larger selloff. Then out of the wild blue yonder a massive futures buy order appeared, and the market reversed - pulling itself from the abyss. One really wonders, and I am not the only one on what the heck is going on out there. (required reading if you dare to be short for more than a few days) Anyhow, a very choppy rest of the week and then a Microsoft led rally on Friday - with the 9.5% move in Bill Gates puppy helping all the indexes as its found in every index!

For the third week in a row Rising Tide Growth Fund had a heck of a performance versus its peer group. The fund was +4.37% versus S&P500 +2.32% and Russell 1000 +2.24%. Despite some blowouts in fund positions, especially weighted by the large position in Blue Coat Systems (through no fault of its own), and some smaller positions being swatted down 20%, the strength in coal, agriculture, infrastructure, and India helped performance this week. I was extremely bullishly positioned as of last Friday with my short ETFs reigned in and very little cash, so that worked out, although at the nadir Wednesday that bullish exposure was about to turn out poorly - but those white horses in the distance came galloping to the rescue (yet again). As of Friday (today), I began doing some selected selling and starting to raise cash incrementally, along with some small buying in short ETFs to begin rebuilding 'insurance' against my long only fund. I expect this to continue as we move to Halloween's Fed meeting.

This is the 3rd week in a row the fund outperformed its measures by >2%; my informal goal is beating indexes by (on average) 0.3% each week which would lead to a 15% outperformance over the course of a year. (surely worthy of you investing in my fund!) :) So it's been a great stretch here, and I am especially happy during the recent downturn the fund lost less than the market, and then on the rebound gained more then the market; even with a few individual implosions in specific stocks (it's going to happen with such a large portfolio). It's also been fun to pull this off with very little exposure to the "sexy" sectors in this recent market post August lows - large cap tech or Chinese stocks.

Price of Rising Tide Growth: $11.718
Lifetime Performance to date (vs Aug 3, 2007): +17.18%

Comparable SP500: 1,535.3 (+4.78%)
Comparable Russell 1000: 836.1 (+5.02%)

Fund return vs SP500: +12.40%
Fund return vs Russell 1000: +12.16%

Last week's results here.

Since the market cap of the median stock in the Rising Tide Growth fund (median $9.9 Billion as of October 07) is significantly below the SP500 index (median $13.1 Billion as of September 07) but higher than the median market cap in the Russell 1000 (median market cap $5.8 Billion as of September 07), I am measuring the fund against both indexes. Click here to see fund's holding by market cap as of October 2007.

Basis for indexes is 5 day weighted average of closing prices Aug 3-9
SP500 : 1,465.2
Russell 1000 : 796.2

To see why I use the 5 day weighted average of the first 5 trading days to smooth out the volatility of the indexes as the fund launched, see here.

Please click here: fund performance for previous updates

Bookkeeping: Closing last of Garmin (GRMN)

The big cap tech rally has been impressive. I just am not sure how much more Apple (AAPL), Research in Motion (RIMM), and Google (GOOG) can take us.

I don't want to sell any Apple, and my Google position is quite small as it is (around 0.6% of fund), so I am going to clear out the last of my Garmin (GRMN) - this is the one I have the least amount of long term conviction with, although I do like it for a "Christmas gadget" trade. However, it has not rallied with the rest of the group in a very "tech" happy day; and I have some nice gains on this stock I'd like to lock in; while raising cash. Since its a small position I will close out the remaining 50 shares, raising $5900.

I bought Garmin off the Navteq (NVT) - Nokia (NOK) panic, when it sold off 20% immediately - and the stock has done very well for me since; I took it up to nearly 3% of the portfolio on the panic selling and am going to bid goodbye for now. Certainly the stock can continue upward, I am just going to focus in other areas, unless Garmin pulls back about 10% to lower mid $100s. Out in $117s.

Long Apple, Google in fund; no personal positions

The Day After: NII Holdings (NIHD)

Ok let's circle back and see what they are saying about NII Holdings (NIHD) since this was a stock that was destroyed yesterday on what looked on the surface to be solid earnings and revenue growth; but it's chart had been weak the entire quarter telegraphing this "bad"? news. I added a bit yesterday to my previous 1.7% position, but once again, when growth stocks implode, they usually will dead cat bounce, and then go sideways for quite a while, so I believe this to be the fate for NII Holdings.

Yesterday morning I wrote

NII Holdings (NIHD) - Ok this one confuses me; the only thing I can figure out is there is some cell phone industry growth ratio that analysts had, which the company did not exceed. Or guidance was not good enough. They beat on the top and bottom line and the stock was trashed by 18%. I had a 1.7% position in NII Holdings and bought 130 shares to the 290 I had, increasing the position by 44%. Just like with Cummins I don't expect a quick rebound but when I can buy these quality businesses for a nice discount I will take the opportunity.

The day before I had written:
I hope they come out with bad news, disappoint, and can finally sell down to an area it makes a bottom so it can begin the rebuilding process. I really like the potential in this company, but its been stuck the entire quarter in molasses.

S
So what's the word on the street now...

via Forbes:

• A company lives and dies by its numbers come rain, shine or hurricanes in Mexico. So despite a 24% increase in profit for the third quarter and earnings per share which blew away Wall Street’s expectations, it was NII Holdings lower sequential subscriber growth that disappointed analysts.
• The mobile communication provider for businesses in Latin America saw its net income increase to $81.6 million, or 46 cents per share, up from $65.7 million, or 38 cents per share in the prior year. This includes a $22 million charge related to its debt offering. Excluding the charge earnings were $104 million, or 61 cents per share, which beat analysts expectations by 8 cents.
• Sales soared 39% to $852.9 million up from $615.6 million in the prior year driven by higher subscriber numbers with net additions rising 23% compared to the same period last year.
• NII added 327,000 net subscribers during the third quarter for a total of 4.4 million subscribers, a year-over-year increase of 38%. But the company had added 331,000 net subscribers in the second quarter.
• The sequential difference in subscriber growth disappointed investors and they let the company know it. The Reston, VA.-based company’s shares plunged 21.3%, or $14.82, to $54.62 on Thursday afternoon.
• Steve Shindler, chief executive officer of NII, said that the slower subscriber growth was due to an increase in competition in Mexico and bad weather which impacted businesses in some of the company’s key markets for the quarter. He said the company is working hard to meet its previously raised guidance of 1.275 million net subscriber additions for the year.
• Wachovia Capital Markets analyst Gray Powell said the hurricanes in Mexico cost the company between 10,000 and 15,000 additional subscribers. Although, Powell says, the hurricane doesn’t explain all of the third quarter’s subscriber shortfall, the company believes things will improve in October, which should begin to show in the fourth quarter.
• The company also said the number of net adds in 2008 will be higher than 2007 and should be up in Mexico next year. “This indicates to us that the story is NOT broken and that the potential for strong growth still exists,” Powell said. Although Powell said “stock is likely dead money for the next few months due to a lack of catalysts” he thinks the stock over the longer term is more compelling. He rates the stock an “outperform.”

via AP:

• Shares of NII Holdings Inc. sank Thursday after the wireless service provider to Latin American businesses posted what one analyst called "worse than feared" third-quarter results.
• NII added 327,000 net subscribers during the quarter, below analysts' consensus estimates of 350,000, noted Thomas Weisel Partners analyst James D. Breen.
• He said the weakness in net customer additions came mainly from Mexico, due to disruptions from hurricanes and increased competition, and from Brazil. Breen nonetheless kept an "Overweight" rating on the stock.
  
• "Despite lower than expected net adds in Mexico, we continue to believe that the company's growth prospects in both Mexico and Brazil remain strong," he wrote. Breen said NII remains his top pick in the wireless sector amid high growth prospects in Latin America.
• Stifel Nicolaus analyst Christopher C. King, meanwhile, called the quarter "worse than feared" and said competition from Telefonica SA's Movistar unit in Mexico, along with weather problems, likely hurt results. He nonetheless kept a "Buy" rating on the stock.
• Deutsche Bank analyst Rizwan Ali called the stock price drop a buying opportunity. "We believe the weakness in the quarter should not indicate a long term trend as the level of service and the technology offered by NIHD is still very attractive to its target market segment," Ali wrote.

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Takeaway: Well there you have it folks; classic Wall Street fear. A growth stock that as it gets bigger actually slows down a bit growing (law of large numbers). So they beat top line; they beat bottom line but their SEQUENTIAL net subscriber growth was negative, hence it means trash the stock 20%. It all makes sense now. Yes there will be competition; very few companies are able to operate in monopoly conditions but we have young markets where cell phone penetration is far below US or western Europe (or even many parts of Asia), and a focus on the business customer which has more profits. Anyhow that's all thrown out the door.

So let's say the company can only grow (gasp) 28-32% over the next 2-3 years, instead of 40%. Let's say next year's $3.59 is at risk and they are going to be 10% lower at $3.23.

At a price of today's $59, I get a company growing 30% for the next few years in a young market and trading at 18.2x my $3.23 earnings number. Now keep in mind I just made that figure up; despite the (gasp) lower sequential subscribe adds (year over year adds are still very high), the company still beat their earnings number ($0.61 vs $0.53 analyst expectation) so my lowering to $3.23 is truly saying things are going to go downhill.

If you still believe the $3.59 figure for 2008 than it trades at 16.4x next year's earnings. And I am claiming only 30% growth - the projections are still upper 30%s. So that should expand the PE ratio even higher.

So what we have here is a very technically broken stock (both the 50 and 200 day are way up there in the low to mid $70s range), which is trading at about half its growth rate simply because wall street is obsessed with sequential growth and could care less about year over year growth. If the PE here was 60 before the earnings I could understand the sell off, but it wasn't even half that. So it looks like yet another overreaction. While the stock might not rebound soon, it has now turned into a 'value' in the growth space so a year from now when they hit mid $3.00 earnings with a 30%+ growth rates I think it will be worth a bit more than this measly $59. Amazingly the stock is at its lowest point in 12 months, despite tacking on a whole lot more of earnings power from where it sat in October 2006. Shows the power of multiple contraction. For those with patience this will reward... as I wrote in green above, we now have the bad news out in the open that the stock was telegraphing this quarter by its weakening stock price, so the boogeyman is now a bit less scary since its not under the bed and instead on the P&L.

Long NII Holdings in fund; no personal position

Bookkeeping: Compelled to Take Some Profits in Mosaic (MOS)

Mosaic (MOS) is up 17% from its low of the days yesterday where I added, from $60 to $70. Spectacular move. I am going to sell some here and bring the position down to 3.55% of fund, 600 shares. It is only prudent in this volatile market to take some off the table when you have such massive short term gains. Mosaic won't be below 3% of holdings for a long time - I will add back these pieces I sold off on any pullbacks.

I trimmed a bit off my 2 major infrastructure names as well McDermott (MDR) and Foster Wheeler (FWLT) as they have bounced very strong from last week's lows when I rebuilt my positions, but again I plan to keep these as major positions as areas of growth are going to be far fewer as we move forward and the domestic economy slows (and I contend global) begins to slow. So companies with backlog visibility and pricing power will be even more valuable - hence the huge moves you see in large cap tech stocks of late.

I continue to look for places to cut to get the cash position closer to 10%, and so I can rebuild short ETF levels to more protective levels.

I'm trimming as we go into Fed Trick or Treat time - I just don't know what the next catalyst is going to be. 25 basis cut is now 'expected' - the Fed "now gets it" (which was an issue of doubt before the last cut) - and if they go 50 basis points people really need to start asking if everything is so happy go lucky why we had to cut 100 basis points 6 weeks. I remain cautious and hence I am taking profits as they are offered. Are we really going to go to record highs when 20% of the S&P500 (financials) are hitting new lows almost daily? These dogs will probably rally on the Fed anticipation which will be a great time to add to the UltraShort position against them. As I have been saying for months, more cockroaches await us in the future - now we will begin talking about "next quarter's write offs" and just how big they will be. I can't wait to hear the rejoicing when there is "only" a $2.5 billion write off from one of these banks. What are write offs anyway? Do overs? They don't count? Why can't I write off my mistakes....? Make them go poof and wash my hands of it all like our financial institutions appear to get away with. Blah.

And maybe it is just me, but the bears literally seem afraid of Uncle Ben. Fearing another 50 basis points crammed down their throats, and the bulls romping. They don't want to get burned yet again (once on the surprise 50 basis discount cut, then the double whammy 50/50 fed funds/discount cut 5 weeks ago) So if they are all positioned NOT to be burnt this time, what will fuel the 'expected' rise post Fed cut this time? Won't be nearly as many shorts to cover in panic this time since they are all so shell shocked from Uncle Ben's helicopter barrage of the past. Hence, why *this* time it might be a sell the news reaction. Another reason to be cautious. But that doesn't mean we cannot rally into the expectation.

Long Mosiac, McDermott, Foster Wheeler in fund; long Mosaic in personal account

India Up, China Down? Changing my Indian Focus

Interesting to see some weakness in Chinese shares this week, as GDP growth "slowed" to 11.5%. Wow, how will they ever survive ;) These interest rate cuts at 0.27% a meeting, are really quite ineffective. Ironic that we are cutting at a faster rate than China... ironic, not in a good way.

Meanwhile, India is doing very well. Looks like my timing last week in getting into the Indian names (Buying a Bucket of India), as the Chinese stocks seemed overcooked is working out well.

Today we have the two Indian Banks ICICI Bank (IBN) +9%, HDFC Bank (HDB) +7.5%; also my Indian copper stock Sterlite Industries (SLT) +7%. Even the broad closed end India Fund is +4.5%. Tata Motors (TTM) is lagging a bit but still up 3.8%.

While it is nice to get this short term victory in the stock prices, upon reflection I am going to reallocate my positioning in India. I have purposely stayed away from the outsourcing stocks due to the strong rupee (strong currency means less exports and these companies by nature are outsource firms!). I reluctantly created the Tata Motors (TTM) position as I built a basket of Indian stocks - at the time I wrote:

Tata Motors is part of the Tata Group (think General Electric of India) with their hands in everything. Un