WSJ: Five Ways to Fix Up Your 401k Plans

Steps 1 - 5: stop contributing.

Kidding... kidding. The Wall Street Journal has an interesting blurb on how to "catch up" so you only need to work til 72 years old instead of 84. :) The move from pensions (which are unaffordable to companies in a global competition versus peers who do not need to fund them) to 401ks (which require diligence, stable job participation, 30+ year time horizons and financial acumen; all things severely lacking in the U.S.) will prove to be a long term disaster... but since it won't all explode in a 3-4 year time frame like the mortgage mess, this will be an issue that will come to the fore front over the long run. When many baby boomers realize they are going to be working "til they drop". (not to mention the cost is punitive to most small businesses, which employ the majority of Americans)

• In the midst of a market meltdown and economic crisis, many Americans' 401(k) retirement plans are looking a bit bedraggled. But some tender loving care from plan participants, employers and policy makers can help spruce up these accounts.
  
• Market upheaval has underscored a litany of woes in 401(k) plans. Many people don't save enough, make poor investment choices, pay high fees that eat into returns, and raid their retirement accounts to pay credit-card bills or fight foreclosure. Meanwhile, hard-hit employers are suspending 401(k) matching contributions.
• In the 12 months following the market's peak in October 2007, more than $1 trillion worth of stock value was shaved off 401(k) and other defined-contribution plan accounts, according to Boston College's Center for Retirement Research. Roughly 50 million people have 401(k)s, and these accounts now have about $2.5 trillion in assets, estimates the Employee Benefit Research Institute in Washington.

1. Save till it hurts …

Undersaving has always been a big issue in 401(k) plans, and the economic doldrums are only making matters worse. A recent survey commissioned by AARP, an advocacy group for older people, found that about 20% of workers age 45 or older had stopped contributing to a 401(k), IRA or other retirement accounts in the past year.

2 … Even with no match.

Employers' matching contributions are a big incentive for many workers to contribute to 401(k) plans. But major employers like General Motors and FedEx are suspending these contributions, and cuts are on the way at other companies. One out of 10 employers already has reduced or plans to reduce the match, according to a December survey by consulting firm Watson Wyatt Worldwide, up from 6% just two months earlier.

If your employer has suspended the match, you should boost your own contributions to make up for it. Together, the employee and employer should contribute at least 10% to 15% of the worker's salary to build a healthy nest egg, retirement experts say.

The maximum amount most workers can contribute to a 401(k) this year is $16,500. Workers age 50 or older can contribute an additional $5,500.

3 Set it and forget it.

Sharp market swings can lead 401(k) savers to make some poor investment decisions, like fleeing stock funds simply because they've taken a dive. Investors who dump stocks at depressed levels lock in losses that could take a big bite out of their savings.

People who leave the asset-allocation decisions in the hands of a professional don't have to worry about making emotional investment decisions in rocky markets. One solution: So-called target-date funds hold a broadly diversified blend of stocks, bonds and other investments and gradually shift toward a more conservative mix as investors near retirement.

But be aware that these funds can still fall hard and fast. The average target-date fund dropped 32% last year, while the Standard & Poor's 500-stock index fell 38.5%. Even 2010 funds for investors about to hit retirement fell 25%.

4 Pay attention to fees.

Hefty fees can put a lot of cracks in your nest egg. Yet many employers haven't even tried to calculate the total costs of their plans. You should be able to see the total dollar amount you're paying in plan fees so you can compare the 401(k) and other savings vehicles such as an IRA, Ms. Benz says.

5 Get more workers saving.

Many companies don't offer 401(k)s, and many workers who do have the opportunity to invest often simply don't.

More and more employers are automatically enrolling workers. But many of these efforts focus only on new hires. They should also include existing employees. What's more, many workers don't have access to a 401(k). The costs and administrative burdens can be daunting for small businesses.

One solution might be for the government to make it easier for small employers to band together to offer workers 401(k)s, says Paul Stevens, president and CEO of the mutual-fund industry trade group the Investment Company Institute.

Weekend Reading

Stories below I did not have time to get to during the week - peruse at your leisure if any are of interest...

NYT: Welfare Aid Isn't Growing as Economy Falls Off

Despite soaring unemployment and the worst economic crisis in decades, 18 states cut their welfare rolls last year, and nationally the number of people receiving cash assistance remained at or near the lowest in more than 40 years.

Michigan cut its welfare rolls 13 percent, though it was one of two states whose October unemployment rate topped 9 percent. Rhode Island, the other, had the nation’s largest welfare decline, 17 percent.

The program’s structure — fixed federal financing, despite caseload size — may discourage states from helping more people because the states bear all of the increased costs. By contrast, the federal government pays virtually all food-stamp costs, and last year every state expanded its food-stamp rolls; nationally, the food program grew 12 percent.

The Daily Beast: Why I'm Selling My Virginity (hey, it's finance related - it's an economic transaction)

They say you should value having sex for the first time. That's why I'm auctioning my virginity online - and the bidding is up to $3.8 million.

USA Today: Federal Payrolls Keep Growing Despite Downturn

Companies are cutting jobs by the tens of thousands. State and local governments are penny-pinching, too. So what about Uncle Sam? Tough times for him as well? Not exactly. In fact the number of federal workers is on the rise.

"All of a sudden, it's a much older clientele calling up saying they're interested in government work because they lost their jobs, their companies merged, their companies went bankrupt and they're looking for stability," said Ross Harris, sales and marketing director for the site. "The perception is that federal work is more stable — that there aren't as many layoffs."

The Big Money/Slate: Fighting Over Money - What CNBC Has in Common with Professional Wrestling. I love this piece, it is so dead on - the screaming and "conflict" on this channel along with the historical cheerleading has really been a let down. But that's cable TV - yelling and conflict sells.

The recession makes everyone tense, but nowhere does that tension seem to break out as regularly as it does on CNBC, where frustration and recriminations over fraud, risk, and lost trillions repeatedly roll into a boil-between the on-air talent.

The constant carping, acting out, and cartoonish behavior has been anything but bad for CNBC's brand. In fact, it is part of a conscious strategy to take what was once a staid place where the markets themselves starred and turn it into a free-for-all with heroes and villains and a running back story sort of like professional wrestling.

The daily diet of shouting and good-natured trash talking looks less like wrestling than football or, at least, any given weekend's coverage of football. In fact, CNBC's programming day is a bit like Super Bowl Sunday. Squawk Box is the pregame show, Power Lunch handles the half-time entertainment, and Fast Money is the postgame strut in which players trade war stories and chest bumps and constantly try to one-up each other.

WSJ: Nations Rush to Establish Trade Barriers. As predicted... humans are humans.

Countries grappling with global recession have enacted a wave of barriers to world commerce since early last month, scrambling to safeguard their key industries -- often by damaging those of their neighbors.

The European Union has warned the U.S. that proposed "Buy American" provisions in planned stimulus spending could break trade rules. Meanwhile, EU nations have reversed direction and tightened their own trade rules, for instance by resuming subsidies to dairy farmers' exports and effectively barring Chinese screws and bolts from their market, while accusing China of dumping them below cost.

The U.S. is planning retaliatory tariffs on Italian water and French cheese to punish the EU for restricting imports of U.S. chicken and beef. India is proposing to increase tariffs on foreign steel at the request of its steel industry.

Economists and trade analysts say the current rash of trade constraints could make it harder for global economic growth to recover from the current downturn. Global trade is expected to shrink by more than 2.1% this year after growing by 6.2% in 2008, according to the WTO.

Reuters: Models are Going for Half Price. Models of what you ask? The human kind. Even in Milan! The horror. (I love the quote at the end - the priorities in this world are awesome)

But at the haute couture shows in Paris, the leggy blondes in silk dresses who advertise a life of luxury are finding their world turned inside out by the economic crisis. "Half price! It's half-price everywhere, in Milan, even in New York," cried Anna Chyzh, a 23-year-old from Kiev who had just changed out of a Stephane Rolland haute couture gown into jeans and was headed to the next show.

She put her degree in political science on hold a year ago to work full-time and shares part of her fees with her family. "There is still more money in this than almost any other job. I earn more than my parents -- it's kind of sad, they went to school and have worked for years," she told Reuters.

Reuters: 9 Year old Whiz Kid in Signapore Writes iPhone Application

While most children his age sketch on paper with crayons, nine-year old Lim Ding Wen from Singapore, has a very different canvas -- his iPhone. Lim, who is in fourth grade, writes applications for Apple's popular iPhone. His latest, a painting program called Doodle Kids, has been downloaded over 4,000 times from Apple's iTunes store in two weeks. The program lets iPhone users draw with their fingers by touching the iPhone's touchscreen and then clear the screen by shaking the phone.

USA Today: As Recession Ravages their Assets, the Rich Retrench. It is different this time folks.

The rich may not be quite so different than you and me these days: They, too, have less money. Their fortunes have fallen along with the prices of stocks, oil and real estate. Luxury condos on Florida beaches languish; champagne sales are down; private jets sit idle.

Times may be tough for the wealthy, but they're tougher for those who serve and sell to them. "Business may be a bit off this year," allows Doug Turner, president of Millionaire's Concierge in Fort Lauderdale, which offers everything from VIP concert tickets to $13,000 rides in fighter jets for the wealthy. The rich are cutting non-essential items, and that hurts his business. "Everything I sell, you don't need," he says.

And retailers who cater to the wealthy are slashing prices. In tony department stores such as Bergdorf Goodman during Christmas, shoppers could find handbags marked down 40% or more. Big chains such as Saks Fifth Avenue and Bloomingdale's were chopping prices 50% or more. "It was unbelievable," says Faith Hope Consolo, chairman of the Prudential Douglas Elliman Real Estate's retail sales and leasing division. "Luxury never had sales before Christmas before."

In Vail, Colo., the luxury ski resort, lodging occupancy is down over previous years, says Chris Romer, vice president of sales and marketing for the Vail Valley Partnership. But many of the bookings were made at the last minute, in large part because of special offers: lower prices, extra days, free meals.

Bloomberg: Hovnanian CEO Gets Bonus as Company Value Drops 76%. Well not *everything* is different this time. Our cult of CEO situation just never changes.

Hovnanian Enterprises Inc., New Jersey’s largest homebuilder, gave its chief executive officer a 20 percent pay raise in 2008, including an almost $1 million performance bonus, as the company lost three-quarters of its market value.

Ara Hovnanian, who runs the Red Bank, New Jersey-based company his father founded 50 years ago, received compensation of almost $10.3 million last year after getting $8.5 million in 2007, according to a filing with the Securities and Exchange Commission.

USA Today: Many Laid Off Workers Find Health Insurance Out of Reach. Nothing is wrong with the system... nope, not in the richest country on earth. Lose your job, lose your healthcare. Sounds viable. As a certain wing of the political spectrum loves to shrill - these people clearly are just not working hard enough; if they worked harder they would get healthcare.

Most low-income people who lose their jobs are also without health insurance, a report released Friday concludes. A study by the advocacy group Families USA says 54% of the nation's unemployed cannot afford private insurance and also are not covered under Medicaid. The report focuses on middle-class and lower-income workers with annual incomes of about $44,100 for a family of four, or about double the poverty level.

"Most laid-off workers can't afford COBRA coverage and do not qualify for public health safety-net programs," said Ron Pollack, executive director of Families USA. "As a result, millions of middle-class and lower-income workers become uninsured."

In 43 states, Pollack said, Medicaid is simply unavailable for adults who don't have children — unless they are permanently disabled. "Even if those adults are penniless, they are ineligible," the report said.

Bookkeeping: Cutting Quality Systems (QSII) in Half Until Clearer Picture Arrives

A very interesting past few days - congrats for those in the tech/China/commodities trade; you killed it the past few sessions. Looking around at the winners today outside those sectors it's the 'worst of breed" reverting to mean YET again (snapping back to the rubber band after being hammered).

I wonder how many times we can rally on the EXACT same news. 10 days ago we jumped from S&P 830 to 875 on soon to be announced bad bank news. The past two sessions we rally from 825 to 870 on... you guessed it.... soon to be announced bad bank news. Now the countdown for our salvation is Monday at noon.

I am debating who levitates higher over water... Tim Geithner or Obama? This is actually a grand psychological experiment... desperate people tend to cling to hope in their leaders when all else fails. False idols if you will. Especially when they have little else. It is sad that is what we have come to in this country... a lot of fascist regimes actually start off this way. With the power grab at the Fed and other government agencies you can only hope this is not step 1....

But hope it is for a few days... as we've been saying for many weeks - 2009 will be the ping pong between "hope" and "reality". We now have hope... just like we had 10 days ago. We also rallied strongly in December off Geithner's appointment to Secretary Treasury (I remember it was announced at 3 PM and my short exposure was destroyed on a huge rally). Again - he must walk on water.

Most of our long positions are not in the above mentioned "flavor of the past 2 weeks" groups NOR did we decide hey it's time to buy financials, retailers, Las Vegas casinos, or REITs 48 hours ago. This is a daytrader's market and the time frames for "favored" groups are simply too fast for my style. So we're really sitting this one out... along with our short positions obviously working against us the past 2 sessions.

We do have many of our stocks running into resistance so I am making cuts here and there. Many were leaders of January - unaffected while today's "winners" were being slaughtered to the tune of 30,40,50% drops. So it's a completely backwards period right now - we're losing while those names are winning. Just like we were winning in January while those stocks were cratering - frustrating today to not be involved, but we don't have a ton of ground to make up from losses in January so we don't need to take the same level of risks. That doesn't mean I don't wish I had a bevy of Research in Motion (RIMM) sitting on the book at this moment.

One such name that has been mostly not participating of late is Quality Systems (QSII) - the stock is in the mid $37 range, rallying about 6% today. QSII recently fell below the 50 day moving average of $38. And the 200 day is down at $36. A narrow range here, and this is a 50/50 set up - we have no advantage; it could break either way. Until I see more clarity I am going to reduce exposure and cut the position in half from 1.5% to 0.75% exposure. I would like to be a buyer north of $38.50 and a seller(shorter) south of $36. It is in no man's land right now so I don't want to have a major stake either way. Instead I am going to use today's "salvation" as a chance to get smaller in the position.

I also dumped some (homebuilder) Lennar (LEN) into the close.

I'll update Sunday how I plan to play this market as we are at a very important technical level yet again; we're either going to be very bullish (and hopefully not find ourselves turning into Charlie Brown) [Charlie Brown Market] or back to bears based on price action in the first few days of next week. We are simply in the churn zone - now back to the top of it. These are such abnormal times - it is sad how Washington D.C. means more than stock selection or thinking or charts. It's been going on for so long that it's now become old hat aka the "new normal"...

Be here at noon Monday when Sir Geithner unveils how the US financial system will be fixed. Hopefully he announces it while standing directly over the Atlantic... that would be make for great TV! Sir, your peons await your great blessings....

Long Quality Systems, Lennar in fund; no personal position

Americans Will Be Refinanced By Any. Means. Possible.

Homebuilders flying today - that was my pick for stealth bull market sector for 2009 in my 2009 Outlier Predictions [Dec 16, 2008: 13 Outlier 2009 Predictions] - and why should they not be when we are going to give away homes for (near) free.


Sometimes as I read these stories I feel like I am reading a piece of fiction. What we are doing simply cannot be true. I cannot wrap my mind around all the potential unintended consequences we are going to be created with this smorgasbord of proposals.

My mind almost imploded when I read this one in December [Dec 11: Fannie, Freddie Consider Waiving Appraisals for Refinancings]

I wrote that 2009 will bring us "innovations" and "interventions" like nothing before (with Fannie and Freddie as the centerpiece of the toolbox) so I guess I should not be surprised by this proposal. That said, my jaw hit the floor when I read it. I hit refresh a few times - checked the calendar (nope, not April 1st) - certainly this must be a hoax.

So get ready for this; no matter what your home appraises for - if it falls 10%, 20%, or 30% below purchase price, and you are underwater - you can STILL refinance under the latest proposal being floated at the full original mortgage value. Imagine a nation of people whose value of home when bought was $280K and now its $180K (as it would be appraised), but instead of being underwater $100K (i.e. out on the street when unable to refinance) the generosity of government gives the full $280K at a lower rate - 4.5% of course as part of the Treasury plan being floated. So you see where this is heading - a nation full of phony mortgage values (set by government) at a phony rate (set by government). Hello USSAR.

And the hits keep coming - check out the credit scores below in this story from Bloomberg "Fannie Mae to Loosen Rules for Home-Loan Refinancing". As you do please realize that in the mortgages we've been modifying in 2008 the delinquent rate is already OVER 50%!!! in under 6 months! [Dec 8: More than Half of Homeowners with Modified Loans are Back in Trouble] Not 1 year later, not 5 years later. In 6 months! And that's before the teeth of the recession set in during the late portion of 2008. As people lose jobs in increasing manner the default rate will only increase - we are throwing money down a black hole and simply creating more burden upon burden on "someone" who eventually has to pay.

• Fannie Mae, the mortgage-finance company under U.S. government control, will loosen rules for homeowners seeking to lower their loan payments by refinancing. Fannie Mae will drop some credit-score requirements, reduce income-documentation standards and waive the need for appraisals in some cases. (THAT'S WHAT GOT US HERE IN THE FIRST PLACE!!!)
• The company, which accounts for more than 40 percent of the $12 trillion in U.S. residential mortgage debt, is seeking to break a “logjam” in refinancing and allow more homeowners to take advantage of near-record low interest rates. The program “will streamline” refinancing “for potentially millions of current mortgage holders,” he said.
• .... Fannie Mae, smaller rival Freddie Mac and the companies’ regulator are considering permitting borrowers to refinance even when the consumers owe more than their homes’ worth...
• Fannie Mae’s changes will include allowing borrowers... to qualify for refinancing with credit scores below its 580 minimum. (!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!! below 580?? I mean, it would take EFFORT to bring your score that low! A lot of EFFORT!)

I give up.

[April 13, 2008: Unintended Consequences of the Coming Socialization of the Housing Market]

Pondering Signet Jewelers (SIG) as a Short

Since I missed Zale's (ZLC) journey to sub $1-ish [Jan 23: Where You Won't Shop in 2009], I am pondering Signet Jewelers (SIG) as a proxy. Very weird action today - it is up 14% based on a cost cutting report that happened yesterday - but the report happened in the morning. So the stock did not react yesterday but reacted today. (I assume short covering today)

• Signet Jewelers (SIG.L), the Anglo-American jewellery retailer, reported on Thursday a sharp fall in fourth-quarter underlying sales and said it would outline plans to cut costs and generate more cash in March.
• The 1,959-store group, which owns Kay and Jared in the United States and Ernest Jones and H Samuel in the United Kingdom, said sales at stores open more than one year fell 14.9 percent in the 13 weeks to Jan. 31, reflecting subdued sales of gold, diamonds and wristwatches. Same-store sales fell 16.1 percent in the United States and were down 9.2 percent in the UK. Total fourth-quarter sales fell 18.9 percent to $1.124 billion.
• "On both sides of the Atlantic, we are reducing costs and focusing on cash generation," he said, adding that Signet would give more details on these areas when it published its full-year results on March 25.
• Signet forecast last month that pretax profit for the year to the end of January 2009 would be $180 million to $195 million. It said it would not be paying a dividend as it focused on reducing its debt, which was expected to be between $470 million and $490 million at the year end.
• The company also said it was in talks with its lenders about amending a banking covenant.
  

We have yet another "covenant" negotiation (seriously folks, if you follow any stock that has covenant negotiations please email me) and you know my take on the consumer. This is on my radar... but a bit wary because big day's like today usually end with a short squeeze at the end that wooshes into the close.

Technically the stock gapped up and is fast approaching the 20 day moving average; in a perfect world the stock jumps one more time to get to the 50 day moving average ($8.20s) which gives a much lower risk entry - however the stocks in trouble of late have not even been able to show that much strength...

On a related note - S&P warned of credit rating cuts on 6 more retailers yesterday (I have not looked at them individually but I am sure they are all flying higher today)

• Macy’s Inc (M)., J.C. Penney Co.(JCP) and four other department-store chains may have their debt ratings cut by Standard & Poor’s as the U.S. recession worsens. Macy’s and J.C. Penney face being cut to non-investment grade, or junk, by S&P. Dillard’s Inc (DDS)., Neiman Marcus Group Inc., Sears Holdings Corp (SHLD). and Nordstrom Inc. (JWN) also might be downgraded, the firm said today in a statement.
• The S&P decisions “reflect our deepening concern about the impact of the U.S. recession on the increasingly troubled department store sector,” analyst Diane Shand said in the statement. Higher unemployment, the housing market and ongoing financial-market turmoil make it likely that the recession will get worse through the first half of the year, S&P said.

No position

WWRD? What Would Roubini Do?

I though Nouriel Roubini was a LITTLE too bearish with this call for 6 million U.S. Job losses. Judging from what we are seeing he might be correct. 10 minute video if you choose to pull your head away from the Kool Aid.



I am thinking something around 4.5M "official" (using government numbers) job losses in 2009. 600K down, 3.9M to go. But Roubini's 6M surely cannot be called out of question; if the government was factual in how they measure I'd say 6M easy.

We should be able to do 500-600K a month quite "easy" the next 4 months so that's 2M losses alone. Then if we "reduce" to 200-400K a month the rest of the year, the other 2M should be "in the bag" over the last 7 months. Again this is "official" numbers; I believe it to be far worse in reality.

Just keep in mind that when layoffs are announced there is a federal law that requires a 60 day notice to employees. Therefore all these losses announced in the past few weeks are going to show up as job losses at the earliest in March. Hence will show up earliest in the April government report. I am still sticking with my 2008 prediction that we will reach 10% 2009 unemployment by "government numbers" .....which in reality will mean by old standards we will have a 20% unemployment rate. (5%ish of that is underemployment)

However, I advise you to buy stocks since China is going to save us.

Bookeeping: Short Jacobs Engineering Group (JEC)

Very nice short set up forming in Jacobs Engineering Group (JEC). As I wrote yesterday as I closed out the long side of this position

JEC now has major resistance at $42 - if it breaks over that level I'll get back long. But for now I'm more apt to short it once it gets there. I am selling in the mid $39s but the stock should have clear sailing to $42 if the market lifts.

I was a little impatient yesterday and should of held 24 hours more to get rid of my long stake but the up and down action in the name was getting tiring. So we're here as the stock hit $41.50 intraday; I missed the top but I am going to put the short on here in the $41.10s area. The chart below looks different the charting I use which shows both the 20 day and 50 day exponential moving averages touching at $42. So we have two layers of resistance; further if the 20 day crosses below the 50 day that is even more bullish. I can also make a bull case from the chart (the stock appears to have made a quick double bottom in the $37s) so we'll see how it works out. If we are wrong, we can be out at $42.50 and take a modest loss of 3%. If we are correct we'll shoot for $38 which the stock seems to hit a lot. We did this exact same trade a few weeks ago; I'll allocate 3.3% to this trade.

Short Jacobs Engineering Group in fund; no personal position

Bookkeeping: Dumping Half of Potash (POT)

Potash (POT) has been acting great but I am going to dump half the position here in the $91 range - it is now at a 3 month high and touching highs of early November 2008. I am going to hope for 1 more big day Monday and then drop the position to a 0.1% stake if I can see something close to $100. If not, I will buy back the half I sold on a pullback. My position size has been too small unfortunately on this one. I don't have trailing stops available, otherwise I'd just throw a 4%ish type of trailing stop on here.

Cutting this down from a 1.4% stake to 0.7%.

Long Potash in fund; no personal position

Sequenom (SQNM) With Nice Recovery Today

There is a 8K Filing for Sequenom (SQNM) to provide some clarification to the "controversy" that has been hitting the stock. Seems to have calmed some of the hysteria. With all the Madoff's running around it's a shoot first, ask questions later environment. Personally, I find it ridiculous that they could screw up such a presentation but "stupid" is different than "nefarious". It also allowed me to lower my cost basis so it wasn't all bad even though we're still down overall. Again, to repeat - unless the future test results show major degradation in quality (i.e. 70% effectiveness rather than 90-95%+) this will be a long term hold which we will trade around - the day to day stock price is a random event. Frankly putting any stock price on the name in 2008 or most of 2009 is a random shot in the dark - similar to biotech who has yet to bring their drug to market I suppose. I have a lot longer leash on a name like this due to 'home run' potential than most other stocks.

Decent summary outlined here.

• The San Diego-based company said Tuesday there were errors in a presentation it made the previous week. Sequenom said it misused technical terms to describe the test's accuracy, and miscalculated the percentage of unresolved results from its RNA-based test. Sequenom shares fell 16.9 percent Tuesday and Wednesday.
• In the presentation, Sequenom said SEQureDx had a positive predictive value of 99.9 percent, but it meant to say the test's specificity was 99.9 percent. Positive predictive value is the proportion of samples with positive test results who have the disease, while specificity is the proportion of healthy patients that are correctly diagnosed.
• The presentation also confused negative predictive value and sensitivity. In these samples, however, both rates were 100 percent.
• In a telephone interview, Chief Executive Harry Stylli said the mistakes were "editorial" and that the underlying test data was correct: in 858 samples, the SEQureDx correctly identified 28 cases of Down syndrome in high-risk pregnancies. There were no false negative, or samples the test failed to detect the presence of Down syndrome, and one false positive, in which the test returned a positive result and further testing showed the fetus was not carrying the condition.
• Stylli apologized for the error and acknowledged that the correction "led to folks basically saying we were cooking the books, and that led to the slide in the stock." He added that the data is "extremely robust and high integrity."
• The company is hopes to begin marketing the test in June, pending approval from laboratory regulators. Sequenom is planning to test SEQureDx on 13,000 to 15,000 samples in 2009 and 2010. Stylli hopes those larger studies will convince large numbers of labs to start using the test.

With the recent fall the chart has taken some damage and while keeping a core position I'll be trading some of the stock bought around $17 up at (hopefully) $20. North of $21 we're back to full time bull.

Long Sequenom in fund and personal account

New York Times: Vanity's Downturn - Botox Use & Allergan (AGN) Sales Dip

We noted last year that higher end plastic surgery was taking hits as Americans could no longer use their house to subsidize their breasts, but folks it's really get *ahem* ugly out there. (forgive me - that was just too easy) Not only are make up sales cratering [Jan 16: Make Up is Not Recession Proof] but now this?! Outrageous - if the lack of access to God given right to Botox does not bring the American people marching in the Streets I have no idea what will rile up these generations of slackers!

My personal hope is we have some sort of Botox Bailout as part of the stimulus plan - we just cannot stand for this indignity as a people.

• Wrinkled faces may be the latest example of recession chic. As consumers cut back in the third quarter of last year on expensive aesthetic procedures like breast implant operations, pharmaceutical executives and doctors predicted that one segment of the nation’s estimated $12 billion-a-year cosmetic medicine market would prove more resistant to the weak economy: antiwrinkle shots like Botox.
• But Wednesday’s earnings report from Allergan, the maker of Botox and a leader in cosmetic medical products, indicates that revenue from the less expensive injection treatments is also faltering. The company reported that sales of Botox — both for wrinkle-smoothing and for medical problems like eyelid spasms — fell about 3 percent, to about $329 million in the fourth quarter, compared with the corresponding quarter in 2007.
• Meanwhile, Allergan’s sales of skin-plumping injections — called dermal fillers or facial fillers — fell 8.8 percent, to about $56 million in the quarter, compared with the year-earlier period.
• The company’s sales of breast implants were about $71 million in the fourth quarter of last year, down 12 percent compared with the same period in 2007.
• David E. I. Pyott, the chief executive of Allergan, said in the earnings call that the company had put incentives in place to encourage consumers to have cosmetic procedures even during the economic downturn. These include a $50 coupon on a Botox treatment and a $100 rebate if a customer buys two syringes of Juvéderm, a facial filler. (oh thank God... there are executives in the country looking out for the little people)
• “The message is: this market is going to struggle for a while,” Mr. Nachman said, noting that many people who used to have antiwrinkle shots frequently are now stretching out the time between treatments. “If someone was getting four injections and now they are getting two, right there that is down 50 percent.”

No position

Thoratec (THOR) Beats; Market Yawns

A rotation day is afoot; strange to see some of the old winners just sit flat on their back as the China/tech/commodities trade if on. Almost as if there is not enough money to push everything up at once. We are now back to the top of the "range" - if we get north of S&P 880 we'll consider this a more bullish scenario. We are setting up for a sell the news reaction to Monday's "this is how we are going to save the world" announcements by government.

Thoratec (THOR) reported a nice beat last night but the stock is moribund.

• Heart device maker Thoratec Corp. said its profit jumped 73 percent in the fiscal fourth quarter due to strong sales of its HeartMate II pump. Late Thursday, Thoratec said its profit grew to $6.4 million, or 11 cents per share, compared with $3.7 million, or 7 cents per share, in the fourth quarter of 2007. Revenue increased 34 percent, to $85.7 million from $64.1 million.
• The results exceeded Wall Street expectations. Analysts had forecast a profit of 14 cents per share and $81.2 million in revenue, according to Thomson Financial.
• During that period, the company added 12 new HeartMate II centers, giving it a total of 101 in North America.
• The company said its profit surged almost sevenfold in fiscal 2008, rising to $22.5 million, or 39 cents per share. A year ago the company earned $3.2 million, or 6 cents per share. Its adjusted profit grew to 61 cents per share, from 33 cents per share. Revenue rose 34 percent, to $313.6 million from $234.8 million. More than half that total, $160.8 million, came from sales of HeartMate II and HeartMate XVE.
• Cash and investments at the end of the quarter were $278.6 million, an increase of $60.3 million from the end of fiscal 2007. The cash and investment balance includes $30.0 million of Auction Rate Securities classified as long- term investments.

Guidance

• Thoratec said it expects a profit of 41 cents to 47 cents per share for the year, or 70 cents to 76 cents per share excluding one-time items. It forecast $345 million to $355 million in revenue. Analysts are expecting a profit of 72 cents per share and $353.7 million in revenue, according to a Thomson Reuters survey.

Full report here; it reads in a confusing manner (lots of "adjustments") which might be contributing to the blah reaction.

Until the stock bursts through some resistance above we'll wait to add any. But business seems to clicking along nicely... but not the current flavor of the day.

Long Thoratec in fund; no personal position

New York Times: Dark Days For Green Energy

An interesting tale for those of us (once) solar and (still) wind fans via New York Times. It is so bad in solar than even President (or President Elect) Solar has not run these stocks up. I was pensive on solar (for the long run) early in 2008 [Jan 3, 2008: The Long Term in Solar] but I thought there would at least be 2 years of good times before the commoditization took over the space... credit crisis and plummeting oil/energy prices accelerated the arrival of the massive consolidation stage. At this point solar is just like buying a financial or commodity stock - put your chip down (red or black) and hope that tomorrow is the day HAL9000 & friends run up your stock 15%. Because most other days you are getting pummeled.

• Wind and solar power have been growing at a blistering pace in recent years, and that growth seemed likely to accelerate under the green-minded Obama administration. But because of the credit crisis and the broader economic downturn, the opposite is happening: installation of wind and solar power is plummeting.
• Factories building parts for these industries have announced a wave of layoffs in recent weeks, and trade groups are projecting 30 to 50 percent declines this year in installation of new equipment, barring more help from the government. Solar energy companies like OptiSolar, Ausra, Heliovolt and SunPower, once darlings of investors, have all had to lay off workers. [Aug 14: Photovoltaic Solar Looks to be Arriving in Scale the United States] So have a handful of companies that make wind turbine blades or towers in the Midwest, including Clipper Windpower, LM Glasfiber and DMI.
• Prices for turbines and solar panels, which soared when the boom began a few years ago, are falling. Communities that were patting themselves on the back just last year for attracting a wind or solar plant are now coping with cutbacks. “I thought if there was any industry that was bulletproof, it was that industry,” said Rich Mattern, the mayor of West Fargo, N.D., where DMI Industries of Fargo operates a plant that makes towers for wind turbines. Though the flat Dakotas are among the best places in the world for wind farms, DMI recently announced a cut of about 20 percent of its work force because of falling sales.
• Much of the problem stems from the credit crisis that has left Wall Street banks reeling. Once, as many as 18 big banks and financial institutions were willing to help finance installation of wind turbines and solar arrays, taking advantage of generous federal tax incentives. But with the banks in so much trouble, that number has dropped to four, according to Keith Martin, a tax and project finance specialist with the law firm Chadbourne & Parke.
• Some big wind developers, like NextEra Energy Resources and even the Texas billionaire T. Boone Pickens, a promoter of wind power, have cut back or delayed their wind farm plans. [Oct 26: 60 Minutes - T Boone Pickens]
• Because of their need for space to accommodate giant wind turbines, wind farms are especially reliant on bank financing for as much as 50 percent of a project’s costs. For example, JPMorgan Chase, which analysts say is the most active bank remaining in the renewable energy sector, has invested in 54 wind farms and one solar plant since 2003, according to John Eber, the firm’s managing director for energy investments.
• In the solar industry, the ripple effects of the crisis extend all the way to the panels that homeowners put on their roofs. The price of solar panels has fallen by 25 percent in six months (deflation! deflation all around - except foodstuffs) For homeowners, however, the savings will not be as substantial, partly because panels account for only about 60 percent of total installation costs.
• After years when installers had to badger manufacturers to ensure they would receive enough panels, the situation has reversed. Bill Stewart, president of SolarCraft, a California installer, said that manufacturers were now calling to say, “Hey, do you need any product this month? Can I sell you a bit more?”
• Wind and solar companies have urged Congress to adopt measures that could help revive the market. (who isn't?) But even if a favorable stimulus bill passes, nobody is predicting a swift recovery.
• The solar and wind tax credits are structured slightly differently, but the House version of the stimulus bill would help both industries by providing more immediate tax incentives, alleviating some of their dependency on banks. Both House and Senate would also extend an important tax credit for wind energy, called the production tax credit, for three years; previously the industry had complained of boom-and-bust cycles with the credit having to be renewed nearly every year. (if we're going to go ahead with "stimulus", I'd prefer to spend my unborn grandchildren's money on renewable energy rather than a new ladybug study or building a new road to a new empty office complex/mall)
  

[Dec 20: BusinessWeek - Clouds Over the Solar Industry]
[Jul 10: Well It's a Start - Sunpower to Build 2 Solar Power Plants]

No positions

Another General Shot: Dollar Tree (DLTR)

Ah the lovely randomness of markets - fun times indeed. Dollar Tree (DLTR) has been one of the "Generals" of the mid/small cap space - in fact on my screen for best performing stocks of 2008 it came in 7th with a 60% return [Dec 29: Best Performing Stocks of 2008] Peer Family Dollar (FDO) reported a solid number a month ago and surged [Jan 8: Family Dollar Continues to Strengthen on "Pooring of America"] so it would only make logical sense that DLTR should follow in its step, right?

Not so much. Instead this general was shot with almost no time to even put the blindfold on, even as it narrowed guidance to the top end of a previous range.

• Discount-store operator Dollar Tree Inc. said Thursday that its same-store sales rose 2.2 percent during the fourth-quarter and raised its earnings guidance, citing strong business by bargain-hunting shoppers.
  
• Total quarterly sales jumped 6.8 percent to $1.39 billion, from $1.3 billion in last year's fiscal fourth quarter. "Dollar Tree continues to be right for the times," said President and Chief Executive Bob Sasser in a statement. "The expanded assortment of high-value basic consumable merchandise makes our stores more relevant and continues to drive sales." Sasser noted that Dollar Tree's holiday sales were strong despite a series of winter storms across the country in December.
• For the full year 2008, same-store sales rose 4.1 percent, and total sales jumped 9.5 percent to $4.64 billion from $4.24 billion in the prior year.
• Dollar Tree now expects fourth-quarter and full-year earnings within the top half of the company's previous guidance for each period.

I won't even try to hazard a guess on why a company who reported just fine was treated like this. It's the casino - it is what it is: brutal and random. Maybe it's just their "turn" to face the meat grinder. Gap (GPS) on the other hand reported -23% same store sales (versus -15% expectation) and was up 6%. I guess "it was priced in".

As for DLTR ...in an instant the chart goes from "safe haven" to "death to Smoochie".

No position

Mutual Funds Have a Tough Decade

It's been a rough decade for stock investors of all kind. Last March, before the real carnage of fall 2008 ensued we had written about "The Lost Decade" for US investors [Mar 26, 2008 - WSJ: Stocks Tarnished by Lost Decade] - similar to what Japan has been experiencing for 2 decades. I wrote

For the great many who live normal lives and investing is simply something they do through most large cap mutual funds (many of which are simply S&P 500 clones disguised to rake in large fees) in their regular accounts or 401ks, it's been a tough decade. And that's not adjusted for inflation in which real returns are clearly negative.

So while the stock market does well over "long periods" of times, I'd consider a decade to be a serious amount of time - and this has been a bad decade. Unless you had the stomach (following huge losses in 2001/2002) or simply had good timing to start following the stock market in 2003, there has simply been no easy way to make money using traditional indexes. And NASDAQ investors? Still down in a big way.

I am mulling if we have another lost decade coming in front of us - don't think it can happen? Japan has been in bear market since 1989. We are NOT Japan, but we do have some of the same bubbles/mistakes (easy money, low interest rates, housing bubble, etc). While we used to allow creative destruction in the past 3-6 months we've seemed to have shifted to a more socialistic model where losses are socialized... sort of what we criticized Japan for doing. And our structural deficits will eat our entire GDP by 2030? Not exactly a path for prosperity....

It has obviously gotten much worse since as we discussed in October [Oct 7, 2008: Bloomberg - 2000s Stock Market Worse than 1930s]

The market actually topped out 1 year ago today (S&P 500) and in that short time has lost a third of its value. Breathtaking. Bloomberg has an article updating on where we stand and it is ugly - if the decade ended now (obviously we have 2 years to go) this would be a worse decade than the Great Depression decade - the 1930s. Now, that's a stark reminder of just how awful the market has been for much of this decade. But not for everyone - just for many of those who play by the rules... I honestly wonder how Peter Lynch would handle this decade when many of the names in his book of "buy what you know" have done, at best, nothing - if not gone down precipitously.

As a curiosity I traveled over to Kiplingers.com to see how mutual funds were doing by category. The results I compiled (annualized return) are below - it is ugly. As you can see the "long only" model of 99.99% of mutual funds really are not performing any differently (as a whole) to the major index. And before you get excited by the "out performance" of the 10 year returns - let me tell you the dirty secret of the mutual fund world. Bad funds have a tendency to disappear into the ether - they are either killed or merged into better performing funds. Therefore their long term results disappear or they don't even make it to a 10 year life. Hence the median of the remaining funds goes up. Magic!


The golden age for mutual funds was in the (mostly) bull market of mid 80s to late 90s... being "long only", except for a few periods, was the way to go as people chased the ever increasing market upward. Hopefully this past decade will show mutual fund families they need to adapt and take on more sophisticated strategies to actually make their investors money or at least, cut down on some of the horrific losses. A year like 2008 will fell almost everyone who actually invests rather than trades - that's understandable. But a 10 to 15% loss can be made up in a reasonable amount of time. 40-50%? Not so much.

/

Charlie Brown Market

As we are so focused on the day to day gyrations by this "market to nowhere" (a lot of churning but going nowhere fast), sometimes it helps to look back over a longer time frame. If I do this over the past 3 months I am naming this the Charlie Brown Market. Every time the bulls line up to kick the ball, Lucy snatches it away. But not without a super tease first.

Let's look back at the chart....


After the November panic blow off low we had a quick V shaped recovery where almost all the gains were made over a span of a handful of days. The S&P jumped from 750 to 860 in 48 hours... that action is why everyone (and mother) is trying to "game the turn". Because if you left on November 27th and came back today we are in the EXACT same spot. Think about that for a moment. We have gone nowhere on the indexes. But not without a lot of hope, emotion, teasing, Obama, drama, and Madoffs.

I want to look closer at 2 periods - first the "transition period" between the political regimes of Bush/Obama. I actually enjoyed that time because the market was range bound and there was no political/CNBC interference/surprises since we had a lame duck President. There were some good trades to be made in individual stocks; but let's talk about the index. We were saying at the time we were range bound and building a base - going sideways. The longer the base, the stronger the ultimate move. That is shown in that first green box that encompassed most of December. We had noted that the longer we based below key resistance levels (in this case the 50 day moving average aka red line) the higher the propensity that the ultimate move would be DOWN...

Well guess what? Lucy showed up with her damn football. In this case Lucy was known as Lucy Obama. Hope. A new day. A new year. Our problems go away since the date ends in '09 instead of '08. Whatever the CNBC explanation was - the market looked to break out... the football was set; all Charlie had to do was kick it and off to the races we would go as all the technical traders (and HAL9000s) in America would buy the chart - even if the news was horrendous. Because to them all that matters is "price action" - not fundamentals. The Baltic Dry Index was showing signs of life, commodities took off, Chinese stocks were showing signs of life (hmm this all sounds so familiar) I wrote a piece titled [Jan 6: Back to the Future - Commodities Rule Again]

I feel like I've fallen asleep and someone transported me back to about 9 months... the whole gang is back!

HAL9000 is on a buying spree of epic proportion.

Breakout... breakout... breakout... breakout... global growth is back. Obama says so. (well actually he said yesterday the economy is bad and getting worse - details, details) Everything he touches, turns to gold. Best. President. Ever. And he hasn't even started. At this pace the market might get back to all time highs by Inauguration day. Surely Dow 40,000 will be in reach by end of term 1 in 2012.

When I start seeing action like this - stocks no one wanted two weeks ago there are now fist fights on the casino floor over who can buy it first - and reading the bullishness that has now overtaken everyone.... time to get my jacket on, and begin slinking to the door with the Exit sign over it... keep one foot in the party with my Vodka & Kool Aid tonic in hand... but be ready to be the first to the door when the cops come.

Chart after chart after chart in commodities showed an explosion upward - they were all technically "strong". Then they died as reality struck back. Lucy had done it again.

We have very short memories and are a hopeful lot. Those are probably good qualities to have for what we are facing. But it is a bit bemusing to see the same behavior repeat over and over. Because in the end, the stock market is a great psychology experiment. And we're all the lab rats.

So let's fast forward to the second green box. It should look familiar - we are range bound again... building a sideways base. The longer the base - the larger the move. The longer we go sideways under technical resistance the higher probability the next move is down. (does this all sound familiar?) Commodities are lurching higher, Baltic dry index is all the rage, and China is awesome. Lucy showed up again, instead this time her name was Lucy Leisman instead of Lucy Obama. He whispered sweet nothings last week about "bad banks" that would make our problems go away. The football was set as the bulls (fools?) rushed in on "hope". And Lucy pulled the ball away. The bulls landed on their ... behind. Again.

I'm a cynical guy in a treacherous market. One day I will be wrong to be cynical. One day we'll break out for real and Charlie will kick that ball just before Lucy snatches it away. But the stock market is about probability. The ever hopeful will constantly try to game that "turn" like we had in those 2 days in November because if you are the perfect timer you can make 15% on the index in 48 hours. But that's not investing; that's gambling. And hope.

**************
As we hone in closer on the near term chart of the S&P I will say this - in a market dominated by technicians as the buy and hold crowd has been slaughtered, I will say if the S&P breaks north of 880 or so the football will be set on the ground once more.

And this time it might stick for a while. I am willing to suspend all belief if the "price action" says so because the economy is not the market. Thesis rules in the short term - and I don't want to be intellectually correct but poorer in pocket. But we'll miss the first part of whatever "bull" move there is as we let others swing their legs and flail over and over (missing). When we see a few of them hit the football, we'll join late. But our uniform will be clean. And capital far more intact. But it won't be quite as exciting as talking about how our leg is swinging for the fences every 4 days on this reason or that.

It's been 'right' to be a cynic for a year and a half now... especially for anyone with a time line greater than 3-5 sessions. One time it will be VERY VERY wrong. And those who have been wrong the past year and a half will crow how they were right all along. Although they will be poor. But lauded on CNBC.

We'll clap from afar. And smirk.

But for now - get your chips ready. Red. Or Black. The lemmings will attack at 8:30 AM tomorrow morn, when all the news we have heard about unemployment week after week after week means nothing. Ignore the companies. A government report delivered from Mount Olympus will tell the peons how to trade. Obey them. They are our protectors (as you shall hear next week). The only question is which Lucy will be delivering us this happiness.

Large Contract Win for AeroVironment (AVAV)

AeroVironment (AVAV) is roughly a $300M revenue company so this news is very good... 1 contract alone is worth greater than 10% of revenue estimate and within a 12 month span. A nice positive in a murky market.

• AeroVironment, Inc. (AV) (NASDAQ:AVAV - News) today announced that the U.S. Army has ordered additional RQ-11B Raven® small unmanned aircraft systems (UAS) and associated services for its fiscal year 2009 requirements by the exercise of an option under an existing contract. Each Raven® system typically consists of three aircraft, two ground control stations, and spares. The aggregate order value is $41.7 million and is fully funded. The items and services provided under this award on this multi-year contract are scheduled to be delivered over the next 12 months.
• AV’s Raven® system is a 4.2-pound, backpackable, hand-launched sensor platform that provides day and night, real-time video imagery for “over the hill” and “around the corner” reconnaissance, surveillance and target acquisition in support of tactical units. U.S. and allied armed forces use Ravens extensively for missions such as base security, route reconnaissance, mission planning and force protection.

[Sep 16: New Position #2: AeroVironment]

Long AeroVironment in fund; no personal position

Bookkeeping: Closing Gmarket (GMKT) Short

I have been attempting to liquidate my Gmarket (GMKT) short the past 3 sessions in pieces, partly for mechanical reasons and partly for it's hit my stop loss area. The way these online tracking systems work is for every trade in the "real world" they take a portion (something 5% sometimes 10%) and apply that to the tracking system. So low volume stocks are very difficult to build positions in or trade around. When I used to follow Gmarket closely 2006-2007 this stock routinely traded 300-500K shares a day with many days >1 million. Yesterday it traded 25,200 shares and thus far today 11,000. Yikes.

So getting out of a 2500 share position when you are only getting a fraction of the "real time" volume is a monster. I've been selling 500 lots every 4-5 hours the past 3 trading sessions - just impossible to work with such a low volume mechanically in Investopedia.com. Nor is it something (at that volume) I could do in a mutual fund.

I shorted in the $14.80 area [Feb 2: Bookeeping - Shorting Gmarket] with a 3.1% stake and have been covering $15.10 to $15.40 in bits and pieces. I had written my stop loss area was $15.35 but with the low volume my limit order to get rid of the entire position was not filling. So I'm down to my last 500 shares which I hope to get rid of by the end of the day. Intraday the stock has held its 50 day exponential moving average of $15 each of the past 4 days so the strength is pretty solid (that said, with no real volume who can really tell?) and my original thesis of a quick reversal has not played out, so we'll take our 4% hit and exit stage right (albeit slowly)

EDIT 2:45 PM - last of position closed

*****

Thus far I have been messing with stocks that are actually quite strong (gapping up on good news) to short. The reason is the ideas I want to focus on for fundamental reasons have been in constant free fall and I prefer shorting those names when they rebound rather in the middle of a tailspin; since I fear a reversal (the most beaten down stocks have a nasty habit of a +30% day when you least expect it). So it's been a less than premium strategy on the short side although this is only the 2nd loser trade (the other being Goldman when the bad bank news came out)

I'm flattish on the 3 remaining major short positions - trading around them a bit but I was hoping some of these casinos, retailers, financials, or other consumer discretionary stocks would pop. I missed a chance at some individual REITs last week - I went with the index instead which worked out very well but the individual names in my watch list have fallen twice as much. On the next rally I am going to try to focus on 1-2 office REITs, and 1-2 mall REITs and exchange it for the general REIT index short. The list of candidates is immense so we'll see when we get there. (if they bounce)

Anyhow, in a blink of an eye we jumped from the "magnet" point of the past 3 weeks (S&P 820) to near the top end of our range. We have lemming risk tomorrow (oh my gosh we only lost 550K jobs instead of 625K jobs! celebrate! Buy stocks!) and then government risk hot and heavy next week. Just reading some comments online by some people who "trend trade" like me over longer periods of time - there is major frustration out there since the time frames are so short and reversals happen in hours or at most a few days. The 3-7 week time frame to hold anything seems an antique. Stylistically, this has not been "my type" of market for many many months - so just treading water until holding something for 2-3 months is not looked on as a sin.

By the way one of my outlier predictions for 2009 was a weekly jobless claim number of 725,000. We hit 626K today.... which is a record. My number is looking very plausible by this spring. But nevermind that - the government will save us with accounting rule changes. Problem solved. Buy buy buy.

Short Gmarket for a few more hours more in fund; no personal position

Bookkeeping: Closing Jacobs Engineering (JEC)

Did CNBC get you again? We are in this very tight range of S&P 800-860 (look at a 1 month chart and see the past 3 weeks) just ping ponging. As I have been writing for the better part of a year - we have CNBC risk on top of all our normal risk. Whenever I see a crazy spike up or down I run over to CNBC.com to see what rumor or news they broke that caused the lemmings to act. There seems to be happiness that the U.S. is going to potentially suspend accounting rules. Sounds kosher!

• Under the emerging plan, the government will buy toxic assets below the banks "carrying value," which is basically market value, but not at fire sale levels, the source said. That approach will likely placate both taxpayer and Congressional concerns about the government over-paying for the assets. But, the source noted, it could "trigger an accounting problem for the banks," presumably because the institutions will have to report a loss on the transactions.

• The Obama administration is now working on ideas to address that, which might entail a temporary suspension of certain accounting rules.

If you don't like what the accountants say, change the rules. Our evolution to a banana republic continues.

Of course the market loves it :) When you live in a world of fiction life is much easier.

Back to reality...

I don't like the price action right now in Jacobs Engineering Group (JEC) so I am going to close out the smallish position I have left (0.9%)

I could choose to trade this range up and down $38 to $42 but its tiring. In fact the whole market is tiring of late - making small trades, scalping this here or that there - waiting for "breaking news alerts". It's just not my thing - if you don't daytrade this market there is really no reason to be involved.

JEC now has major resistance at $42 - if it breaks over that level I'll get back long. But for now I'm more apt to short it once it gets there. I am selling in the mid $39s but the stock should have clear sailing to $42 if the market lifts. We have a loss in the long position that was offset by a successful short position a few weeks ago. So net net - we more or less made nothing with JEC.

As for the market, until we break out of this white noise range of 800-870 or so we are just being batted around by hedgies and daytraders. The "chosen ones" for this portion of your move is China & technology. And Morgan Stanley! (apparently whatever the government does to the banks, Goldman and Morgan will win - shocker) Whatever your conviction over the medium run, remember thesis rules the short run. The market wants to ignore bad news and look forward to the coming China led, semiconductor led recovery "in 6 months". This is about the 5th time in the past year we've had different combinations of sectors doing this same "recovery" trade. This time around it's tech and China. Away we go.

p.s. I like the action in the fertilizer stocks.

No position

Bank of America (BAC) Below $4

Mark wondered two months ago in [Nov 26: After Citigroup is Bank of America Next?] Magic 8 Ball says Yes!

We posed the exact same theory after the Citigroup (C) bailout was announced. Good to see realism and cynicism reach into our news agencies ;) That Countrywide Financial exposure cannot be a good thing. I am also wondering if the Merrill Lynch (MER) deal is still going to go through - certainly the terms are prone to change.

A few days later [Dec 1: Hello, I need your Tax Dollars]

Full disclosure - I'd be short Bank of America (BAC) here, with stop loss over that 20 day moving average (aka north of $16.50s or so) - I'd use a 4% stake or so.

I'd be short until the US government uses my own money
[Nov 24: Details on Citigroup Bailout] to blast myself out of my position, using my own taxes to cause egregious losses to myself when they bailout BAC. That's how socialism works. (Or, I'd stick around with a target of $7-$10 if that comes before the government uses my own money against me.)

Hi, my name is Bank of America - aka Citigroup 2.0 [Nov 26: After Citigroup is Bank of America Next?] Now who wants some of these yummy Countrywide loans? Anyone? Will someone else other than Uncle Hank raise their hand? Please... anyone but Hank... please.

Looks like my target of $7 to $10 was more than surpassed... can't claim I'm a bear! A bear would of said $1.

Well that leaves Wells Fargo (WFC) and JPMorgan (JPM) in our path to effective nationalization. [Jan 15: And Then There Was One]

Again, just nationalize the system... we're already there - we're just playing a charade of "free markets" right now. Thank you Phil Gramm.

• A person with knowledge of the discussions said Thursday the new aid package (for BAC) could be modeled along the lines of the financial lifeline that was thrown to Citigroup Inc. in November. (well that worked out well for Citigroup, so why not?)
  

If JPMorgan is attacked later in 2009 it truly will be end of days.

Again - why we are doing this charade going is beyond me - this is nationalization. Take them over - kill equity and bondholders and let's get it over with.

I ask you dear shareholder of Fannie, Freddie, Federal Reserve balance sheet - can you imagine what is going on in those dark crevices where your eyes are not allowed to see? What is happening to that Countrywide Financial (which accounted for >20% of all US mortgages at one point) on Bank of America's balance sheet?

The good news is in the future you won't see the losses these financials are taking each and every day which are now so public in BAC and C. They will quietly suffered - just imagine the carnage going on at Fannie and Freddie.

Lenovo (Chinese computer firm) took first loss in 3 years - CEO resigns. In America the CEO would ask for retention bonus to stay on and "guide the company through this troubling time". Because only a select few are so talented .... It is amazing to see the cultural differences and complete lack of shame. Not one legislative action towards clawbacks in 1.5 years of capital destruction to the buddies who brought down the entire US financial system. In fact I read our friend who once headed Merrill Lynch, Stanley O'Neil (and got $160M as golden parachute to "leave") [You're Fired! Now Here is $160M to Help Ease the Pain] has now found new employment. As thousands upon thousands of his former employees lose their jobs. Lovely. He must have some level of acumen beyond imagination to already be back to another multi million position.

If anyone saw highlights of the Harry Markopolos hearing yesterday laying out the case he PRESENTED (as a gift) to the SEC in the Madoff case, and the abject lack of oversight in the system - you'd simply be disgusted. I need to find a nice summary of the topic to post here in the future - if they were so negligent on something so huge I can only imagine all the medium sized malfeasance they are missing. As always there is not only 1 cockroach - this is just an obvious one.

What a system. If only the American sheeple paid attention - they'd be enraged. Thankfully for those in charge - they are suitably distracted....with belly button lint.

No position