Comments on Fund My Mutual Fund: Americans Running Out of Places to Hide Debt - Now...

Just as it's impossible to discuss jazz music with...

2008-06-25T16:27:00.000-04:00

Just as it's impossible to discuss jazz music without analyzing the role of John Coltrane, you can no longer fully grasp the overall energy bull market without looking at coal.

As a steady stream of industry experts forecasts major shortfalls in the global supply of coal, the sector has been stoking its furnace lately. Consensus is rapidly growing that we are in the early stages of a multiyear event for coal, and investors have boarded the train in droves. Shares of Massey Energy (NYSE: MEE) have quadrupled since last summer, while Patriot Coal (NYSE: PCX) has enjoyed a similar trajectory since emerging last November as a spinoff from Peabody Energy (NYSE: BTU).

Mining equipment maker Joy Global (Nasdaq: JOYG) has made the most dramatic appraisal of the global supply shortage thus far, predicting a 60-to-100-million-ton shortfall in 2008. Meanwhile, Arch Coal (NYSE: ACI) CEO Steve Leer recently reiterated his call for a 25-to-35-million-ton deficit in 2008, while adding that the number could double to 70 million tons by the end of 2009. Citing the added pressures of power shortages in South Africa and transportation bottlenecks in Australia, Leer foresees strong market conditions for at least two or three years.

Offering a context for the coal phenomenon, Leer commented: "The world has never seen 2 billion people go through an industrial revolution, and we're witnessing it right now. It is changing everything...It is certainly changing basic commodity demands and flows."

On Monday, an industry analyst raised predictions for coal prices through 2010, stating that demand will far outstrip supply until at least that time frame. The statement cited rising shipping costs and the potential for a global economic slowdown as potential downside risks to the sector's performance. This Fool sees rising prices for dry bulk shipping supporting coal prices, however, as coal importers are limited by a paltry set of affordable alternatives.

I'm hopeful that Fools heeded previous calls to climb aboard the coal train. Still, despite the very real indications for a long and fruitful ride, I continue to urge careful entry into such a hot sector.

At my age I hope to be doing this for 30 years. I...

2008-06-22T20:21:00.000-04:00

At my age I hope to be doing this for 30 years. If I create a fund I am not going to change the focus every 3 years. So things might be bad for 3 years but in 10 years people aren't necessarily going to be wanting a "bear" fund for the next 30 years.

If I do my job I'll outperform my peers over the long run. If I outperform my peers, I will attract assets. Simple as that.

I'm beating the market by 30% in a very lousy year so I anticipate I'll do ok in a good year too. People will appreciate the ability to generate positive returns in an awful environment, no matter your designation.

Its a market of stocks, not a stock market to me. Always places to find value. That doesnt mean there won't be bad weeks, months, or quarters but this is not a sprint for me, but a marathon.

What if I'm extremely bullish in 5 years? Junk a 5 year return as I abandon the "bear" fund and start anew with a "bull" fund? Lose my entire record and have to start from scratch just because I am suddenly bullish? Etc.

Well I guess that's why your use of technicals is ...

2008-06-22T20:09:00.000-04:00

Well I guess that's why your use of technicals is important...if the market is going to plunge eventually you will probably have some heads up to when exactly the bug down moves will occur.

But I was just noticing how most of your blog entries are bearish in one way or another on the overall market (like the sarcasm when you say "buy stocks its all priced in") well the bear-viewpoints you outline suggest things specifically inflation, and that would ordinarily harm ALL stocks by contracting the PE's. So although the good old MOS POT, SQM, PBR, coal stocks, etc. are doing well now while the market is drifting downward I get a feeling that the bearish views you're outlining in the blog entries suggest even the "generals" will do down longer term.

Well if you are going to be long-biased, yet have so many STOCK-BEARISH viewpoints then I guess you will just try to play shorter term movement- like bear market rallies are usually the quickest and biggest moves for example. Is that a correct idea for one of the philosophies of the fund going forward?

Thanks for any clarification.

Since I a not registering as short fund or ultrabe...

2008-06-22T18:09:00.000-04:00

Since I a not registering as short fund or ultrabear I am going to be biased to the long side.

If you believe the market will be going down for years (or year) on end, then its best not to invest and just short the market on your own.

Myself, I have no idea what tomorrow brings not to mention 1 year out. If you do, you will become a very rich man in a very short amount of time.

Mark this seems like it will hit the market in 200...

2008-06-22T17:48:00.000-04:00

Mark this seems like it will hit the market in 2009, because hope will still be present in 2008. When all this becomes a reality to the point CNBC cannot sugarcoat it (Look retail sales up 0.00000056% even though we gave everyone $600 to spend this month :) and the government says inflation is 2.7%) then the markets will get crushed. This may take down all stocks and do harm to even your well-hedged but long-biased fund. What I am saying is that even the best long-biased funds will have trouble ...I mean look at 2002. I use Ken Heebner as an example, he got killed in 2002 even after surviving in 2000-2001 while shorting the techs. Do think we can see another horrific bear market in 2009 as we go from over-valued to less over-valued (I don't want to says fair value or under-valued because the value of US stocks is a serious question)

I mean at least in 2003, stocks had a floor because our rate cutting did something and there was lower inflation. Now we have high inflation probably accelerating in the next few years (not the government #'s of course) and bankruptcies everywhere and a dead consumer so there cannot really be a floor as there is no hope. especially in the event of world recession because then exporting doesn't do us much good in terms of corporate sales growth.

But what I am wondering is if you would favor an overall short the market. Like say the SDS (ultrashort S&P proshares)

If the market gets taken down to no end and even the commodity winners get crushed in a horrid bear market..how would you manage??

I guess I am asking, why be a long-biased fund in an era when you have so many reasons for the markets to get crushed and potentially take even good stocks down too?

long MA/V, short COF. has paid off brilliantly so...

2008-06-22T14:55:00.000-04:00

long MA/V, short COF. has paid off brilliantly so far. didn't even mean for it to be a 'pairs trade' play, but it has kind of panned out that way. covered COF though on the massive drop so waiting for another pop to get short again. their rising credit card receivables is nuts, not to mention their exposure to bad auto loans.