Monday, December 22, 2008

Bookkeeping: Parachute Deploying

I am hitting the rip chord for the first time on some of the "thesis" plays. We have the Chinese thesis, the infrastructure thesis, and the housing recovery thesis. None of these we "believe" in but hedge funds have been running them up.

All 3 charts are now entering "do or die", they have fallen back to support (or begun to broke below support) - hence I'd rather shoot first and ask questions later. If this is just a head fake to shake people out before resuming an uptrend so be it; all we lost was opportunity.
  1. Thesis #1: All the country shall be awash in bridges and roads - Jacobs Engineering Group (JEC) is dropping from a 2.6% stake to 1.1%. $43ish is a line in the sand that is being tested
  2. Thesis #2: All the country shall be awash in unemployed workers looking to buy homes @ 4.5% interest - Lennar (LEN) is dropping from a 1.5% stake to 0.8% We said we'd be hitting the exits below $9.
  3. Thesis #3: China is ready to rebound as $500B of government spending and interest rate cuts will offset 100M of migrant workers losing their jobs. (sound familiar?) iShares Xinhau China 25 (FXI) is dropping from a 2.7% stake to 1.1%. This one is closing fast on our line in the sand at $28.
Once more, all 3 of these could reverse back to the upside tomorrow so its always tricky selling "around" support. If you are aggressive you'd actually be buying here with a tight stop loss, anticipating a "bounce" off support. I don't have the luxury of stop losses in so I'm just culling. I'll call this the basket of thesis - we're down on the basket from 6.8% to 3.0% of portfolio. If they continue to break down tomorrow, we'll cut more. FXI has a particularly nasty "double top" formation brewing. Also Jim Cramer is now on the China bandwagon (which makes me even more pessimistic than I was earlier on China in the near term), saying they will save us.... if it's not the US government saving us, it's the Chinese. I would like to ask the open question - when do we save ourselves? (save more, act like reasonable adults, end favoritism, have financial and political transparency, sensible regulation, et al)

Make or break tomorrow
Obama help us

Long all 3 mentioned in fund; no personal positions

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