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Saturday, December 4, 2010

Cash Out

Market Pulse

In the last newsletter, I indicated that I was cashing out many of my positions and taking profits “in anticipation of a flat to down US market until the end of December.  I have continued with this process and not been particularly disappointed. While Investors Business Daily declared last week that the upward trend of the market has resumed, I still see it in a largely sideways pattern. Since October 25, the S&P 500 index, as measured by the exchange traded fund SPY, has gone from about 118 to 122 back down to 118 and back up to a little more than 122.  BFD.  It's just not worth the risk to be in the market.

Despite some false optimism about the strength of the US recovery, the latest jobs report brought everyone back to earth. Despite a short-term improvement in the European crisis, the long term suggests many troubles ahead for Spain, Portugal, and Italy while the euro zone itself is more likely to shrink than expand. China continues to boom, but the Chinese central bank continues to raise interest rates. If we've learned anything from the rational non-exuberance of Alan Greenspan here in the US, it is that rising interest rates will invariably choke off any recovery. It would be high irony if China underwent the same kind of housing bubble collapse that the West did – it would likely make what happened in the West look like a stiff breeze compared to a hurricane.

My bottom line is that this is one of those times where it is just very difficult to make money. In such times, Wall Street looks more to me like a roulette wheel than a poker table. During such times, I do not like to sit down and play as the House, e.g., program traders, hedge funds, and the like, typically has the advantage. I have the luxury of doing sitting on cash because, unlike professional money managers who are under constant pressure to continually deploy their capital, I only have to play when I want to. From this vantage point, it's not worth the few percentage points you might gain going into the New Year at the risk of losing substantially more. To put this another way, I prefer to make my money in bunches when the market trend is solid rather than get nicked and cut in any sideways markets.

Navarro's Trading Summary

The little money I do have in play right now remains primarily in some of my small cap biotech favorites. So far, my best trade has been Stellar Biotech.  I got in at around $.40 and after a brief pullback, it's back over a buck. I see this as a long-term play so please don't pump this one on my behalf and then dump it. Do your research, see that it has a reasonable business strategy, and make your own decisions.

As for some other trading highlights, I took profits on my yen short and my long on IMAX, bailing on IMAX because of some concerns raised about their accounting practices that are likely overblown but still capable of battering the stock. I also took some profits in TBT and then promptly reloaded a small position as it fell during this latest European crisis. I will add to this position if either it's swoons once again or develops a strong support level and begins to rise. I am also maintaining a small position in Beazer homes simply because I like it as a canary in the coal mine, a position that will alert me to any recovery in the housing market – a key ingredient of any broader economic recovery.

Lastly, I remain underwater with most of my rare earths positions, but these are small positions and I will hold them to see if this market develops.

Have a great Christmas and Hanukkah! Unless there are important market moving events, I will see you in the New Year.

DISCLAIMER: There are often typos in this newsletter and the culprit has to do with the fact that much of it is dictated using Dragon Naturally Speaking. The accuracy rate is quite high, but some silly things do slip through. So if you see something that doesn't look quite right, trust the syntax and make your own internal correction.

8:48 pm est 


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DISCLAIMER: This newsletter is written for educational purposes only.  By no means do any of its contents recommend, advocate or urge the buying, selling, or holding of any financial instrument whatsoever.  Trading and investing involves high levels of risk.  The authors express personal opinions and will not assume any responsibility whatsoever for the actions of the reader.  The authors may or may not have positions in the financial instruments discussed in this newsletter.  Future results can be dramatically different from the opinions expressed herein.  Past performance does not guarantee future performance.







DISCLAIMER: The newsletters and blogging on this page are written for educational purposes only.  By no means do any of its contents recommend, advocate or urge the buying, selling, or holding of any financial instrument whatsoever.  Trading and investing involves high levels of risk.  The authors express personal opinions and will not assume any responsibility whatsoever for the actions of the reader.  The authors may or may not have positions in the financial instruments discussed in this newsletter.  Future results can be dramatically different from the opinions expressed herein.  Past performance does not guarantee future performance.

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