Tuesday, August 5, 2008

Bookkeeping: "We're Getting Destroyed" Buys

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First time I've been able to look at the market today - it is quite a sad state of affairs for us. Enough is enough - I'm going to finally apply cash to the positions that have been busting us the past 48 hours and in fact 6 weeks.

Fundamentals mean nothing. The charts have broken down across the board, including many that Monday morning we outlined as over the 20 and 50 day moving averages - the "best of the best".

Now these stocks need to be treated like financials - you buy them when they are puked up, and then you have to sell them as they approach resistance. It is sad to see stocks with the better situation treated like this but this is whole sale destruction that makes little sense EVEN IF the world goes into a recession. Trust me, US retailers, airlines, financials et al won't be thriving in a global recession either - this is just an excuse to pummel stocks. But now all the sectors are identical to me - if financials get puked up, you buy and sell at resistance, if global growth story gets puked up, you buy and sell at resistance. They are all the same stock to this market as fundamentals are for old foggies over the age of 45. This is the Nintendo generation and charts are all that matters. Every stock we own is being treated the same - beat estimates and raise guidance? Sell off by 30% within a week. Miss estimates? Sell off by 30% within a week. So what's the difference. I am suspending all fundamental talk from blog until we return to an era where it matters. All that matters is chart and sentiment. ISM shows a HUGE improvement - woo hoo , the economy is contracting less than last month - that's GREAT! Even though 97,000 other measures show the economy degrading or flat at best. But that does not matter - there are banks and retailers we need to buy as the US consumer salivates for new shoes and checking accounts as they can now afford to actually get to the mall (nevermind those credit card bills or heating bills this winter or heck that grocery bill - America is flush with cash again!)

I am making the following purchases - I'll update detail later
  1. Potash (POT)
  2. CF Industries (CF)
  3. Mosaic (MOS)
  4. A-Power Generation Systems (APWR)
  5. Foster Wheeler (FWLT) <--- earnings after the bell
  6. Jacobs Engineering (JEC)
  7. Fluor (FLR)
  8. Flowserve (FLS)
  9. Alpha Natural Resources (ANR)
  10. Massey Energy (MEE)
  11. Walter Industries (WLT)

Again these are now broken charts in most cases - some are holding at or around the 200 day moving average. If/when they bounce they'll be sold as they approach the 50 day moving average. That might be wrong or correct to do. But we have to assume after an oversold bounce they will fail as the hedge funds have abandonded them. And their buying power is all that matters in this new and improved era of markets.

Whatever the "flavor of the day" reason is irrelevent - these stocks are being puked out and they will make up any number of reasons to explain it, most of which are just paper tigers. I can at least understand the commodity stocks but to destroy the global infrastructure plays because oil drops to $120 or is dropping to $100-$110 is plain ridiculous. If we have another day like this tomorrow I'll be buying another batch of them all. Valuation did not just drop 30-40% across the board in a week or less, just supercomputers algorithims.

We're either going to enjoy a bounce soon or be down 10% for the week. I guess even when the global recession hits and these stocks earnings fall by 10-15% from current targets (oh wait, Flowserve just increased their EPS by $1.25 - doesn't fit my hedge fund computer model - does not compute Will Robinson - does not compute) -- as I was saying even as these stocks earnings fall by 10-15% from current targets some will now trade at single digit forward PE ratios for 30,40,50,60,70,80%+ growth. But nevermind that - $3.25 gas is going to bring back the US consumer, while the Chinese economy goes down into flames. We have the perfect econony - stable housing, a strong consumer, a thriving trade surplus, and consumerism - which is 70% of the economy - is booming. So better to buy American than all those silly areas with funny names. Thanks Will Robinson. Over and out.

Yours in Rambling.

Long all names mentioned in fund; long Mosaic, A-Power Generation Systems in personal account


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