Saturday, October 03, 2009


BAGAKOAA * September 4, 2009 Well we hit 91.7% employment according to the Department of Labor this morning. 216,000 people filed, less than expected. So far not much of a reaction to the number. I hope some of you caught Mad Money yesterday. If not I highly recommend downloading it from iTunes. Jim was in his educator role. He did a marvelous job of explaining how he constructs his show and how best to use the information provided. Cramer made it very clear that the lightning round should NOT be used to go out and buy the stocks he mentions. He admits that it is more of a parlor act to keep the audience entertained. He then goes on and does and excellent job of explaining that most of the stocks he discusses are NOT designed for you and I to go out and load up on, but to better understand the reasons why that equity might be a good play. While explaining this he rattles off the microeconomic, macroeconomic, industry and sub sector nuances of why he chooses certain stocks at certain times. After taking one call about when to take gains, he explained why and how he takes a profit. While doing so he used an analogy that you gamblers will love, and I know who you are, where after taking profits and continually trimming your profits to your original position, eventually you are playing with the house money. He then went on to defend his constantly changing his mind. This has given me some concern because I have followed Cramer’s ideas after doing my own homework only to hear him stop talking about the equity or getting a note from him (via my subscription in Real Money Silver and Thestreet), that he is shortening his position on a stock. This was a key point that has helped me this year. This market is whacko. You have to be flexible and realize that even though a stock’s “fundies” (fundamentals) are in order, the sector that equity is performing in may unexpectedly change. Some of this is due to uncertainty, but some of it is due to the trillions coming into the market economy from the US and China with no clear idea of where this money is going actually land. We, as investors and traders (there is a difference) have to be willing to get in and out of a position. Buy and hold will not work for the next 18-24 months. Anyway please get a download of this broadcast it is definitely worth the 45 minute investment of your time. Well today I am going to be taking my own advice and committing the most of the day to actual homework on some of the stocks on my watch list and setting my stops. Of note, I asked for your help looking for some plays on Lithium. There are a bunch of EXPENSIVE penny stocks especially in Canada. I will be checking out FMC and ROC. I did find a beauty while hunting for Lithium. In fact, based upon my Wine Rating Scheme for finding equities this stock rated a 100. My very first 100 in almost two years of using this value investing formulas measuring ROE, 5 years income, 5 years cash flow, net margin to the industry and 5 year average, and long term debt to income. The Company is SQM, based in Santiago Chile. It is a good play for fertilizer as well other base materials such as lithium. According to the financials its lithium production is less than 12% of operations, but it is a very strong solid company. t One last idea worth checking out. If you read the news about the huge oil discovery this week by BP in the gulf, you may have heard the discovery was about 6 miles down. One of the deepest taps in oil history. There are only a couple of players in that type of platform. Some of you did quite well (no pun intended) with me on RIG when we got in about 46-47 last Dec and road it to 80s in May. I took the money and ran. Well BP’s find is stirring interest in several deep water sites in the Gulf and elsewhere. RIG, Transocean will be in play as this happens and the dollar declines driving oil up. The last time I ran the fundies on RIG I gave it an 84. I will check them today. Do your homework. Have a great Labor Day Weekend. SALVE LUCRUM** Brian


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