Wednesday, October 1, 2008

Be sure you are “comfortable” with your positions

I’ve been fixated of late with NCC, but I’ve given a lot of thought to my positioning of investable assets. WWY closes October 6th and I’ll possess more cash, but that’s a good event. The problem side of that is you can’t earn much in short term treasuries, but you can’t lose either! I continue to watch BUD, as a cash alternative, but am not convinced that it’s a cinch deal yet.

I want to buy stock. I’ve been ready with buckets of liquidity and am prepared to buy S&P 500 index funds when I feel the time is right. Usually I prefer to identify individual stocks as opposed to the use of diversified mutual funds or index funds. But since the market indescriminately rises 20% quickly after a market bottom, index fundswill make sense. But, I just don’t think the time is right, even after the bailout legislation.

Why aren’t we ready to celebrate and have stocks move upward? Here are a few, likely, probabilities:
1. A significant number of hedge funds will fail and the list of pension fund customers will affect property taxes
2. Federal Home Loan Banks will be identified as all too similiar as fannie and freddie and full of problematic real estate loans
3. Credit card delinquencies will accelerate anf losses will follow
4. Foreign banks will increasingly need additional capital
5. The safe banks, Northern Trust, State Street, and BONY Mellon will lose huge amounts on securities lending activites to hedge funds
6. All comparisons for homwe and car lending will continue poor as many of the former borrowers were not credit worthy and will not qualify going forward. This means we aren’t going back to past levels of new car sales, new home sales, furniture sales, etc.
7. Disclosure by many companes the “cash” of their balance sheet isn’t cash, but illiquid securities of dubious value which changes the conservative nature of their operation.
8.Emerging markets and commodity safe havens will continue to collapse.

Fun huh! I’ve made myself sick.

Keep your powder dry and invest very selectively. I’ve got several speculative positions and will stay with them and a few core positions that also will stay put. I’ve felt lots of pain and fear with the spec positions, but remain stubbornly convinced that i am correct in spite of 1 through 8 above.

Time to turnoff this computer, refill my cocktail, and watch some mindless TV program.

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