Monday, March 14, 2011

14 March 2011 Resisting the After Shocks


14 March 2011 Resisting the After Shocks

As we mentioned the little bit of gain on Friday was weak on very low volume. No one knows the long term impact of the tragedy in Japan on an already debt weary nation or for that matter how it impacts all countries they trade with. That uncertainty along with continued civil unrest in Bahrain and Libya as well as European sovereign debt issues pushed the market down on light but heavier than Friday’s volume. The Dow and S & P broke fairly important resistance levels of 12,000 and 1,300 respectively. Now you can read all about the nasty numbers everywhere, but we wanted to let you where the brain trusts think the next resistance will be. This is stolen from Charles Schwab Daily Watch and little bit of tea leave reading by yours truly. (Come on wasn’t anybody impressed with that Cronastics Chart last night?) Ok 11,850 ish is where we could see the Dow bounce off from. That would be just hair above the Jan 28 low. Look for (hope for) resistance at 1,279 in the S & P. If they fall below that, hang on to your hat’s Boys and Girls.

The Salve Lucrum Portfolio (Or what is left of it)

As we said we sold out of almost everything last week. Of our few remaining positions, we came very close to our 8% stop rule on WCRX, but it came back a bit at the end of the day. GLD did nothing today. SMTC was up 2% today. Remember we kept our PUT positions on AAPL and AMZN and both of those are getting ripe for the picking. The AMZN put has a nice 32% gain at the close today. SLV is holding a nice 2% gain since we got back in.

One of our stars EBIX was supposed to hit 33 cents a share and we said we would be disappointed with anything south of 40 cents. The hit 42 cents a share BUT took a 3% loss today. We will look at the transcripts for the earnings call and see why. Everything we read tonight was GLOWING. Perplexing, but we are thinking we will pick up some more at the 27.50 level in pre trading hours. Again we should not normally buy in this obvious correction, but this is a great stock with great fundamentals and a pretty chart.

While It May Seem A Lot Like Chasing Ambulances

As an investor or trader (There is a difference you now.) We have to protect our investments by avoiding stocks during a crisis, but look with in those incidents for opportunities. There is a Chinese sysmbol below which shows two women under one roof.

It is the sign for challenge and it is the sign for opportunity. During the SARS epidemic we did quite well with a few pharmaceuticals that were chasing the disease. We also made money of the companies who made those masks that everyone was wearing. During the swine flu epidemic we made a nice margin of the three pharms who had cornered the market on the flu shot vaccines. After Katrina we made some money on a couple of lumber concerns and the industrial supply company W.W, Grainger. There is no shame in identifying opportunities and making a profits so long as you remember where those gains came from and make a heartfelt gesture to be as benevolent as you can. With that pre-amble over, be on the look out for opportunities in the days and weeks that come. Already there are names popping up, The Journal, Cramer, and IBD are beginning to throw some ideas at us.

KUB Kubota Corporation, together with its subsidiaries, engages in the manufacture of machinery, and other industrial and consumer products primarily in Japan. The company's Farm & Industrial Machinery segment offers farm equipment, including tractors, combine harvesters, rice transplanters, power tillers, and reaper binders for agricultural use; small engines; and construction machinery, such as mini-excavators and wheel loaders for various industrial uses.

Their fundamentals suck and they are not highly rated by anyone, but they are local boys in town to start rebuilding the country of Japan. Think of them as the Japanese Caterpillar.

CAT Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. Yes CAT will probably see business increase as a result of the tragedy in Japan as they rebuild but also as the world mines more iron ore to make steel to fit the needs of the reconstruction.

BTU Peabody Energy Corporation, through its subsidiaries, engages in the exploration, mining, and production of coal worldwide. It owns interests in 28 coal operations located in the United States and Australia, as well as owns joint venture interests in a Venezuelan mine. Yes coal will be a dual play as nuclear get frowned upon and the demand for metallurgical coal is needed for the steel demand. BTU is a good play.

If you don’t have the means to explore individual stocks, how about an ETF or two. While the crisis in Japan will cause some short term food source issues, that will be on top of food and grain crises already occurring. Remember the fire in Russia, we have fully replanted and recovered from that. Last year torrential rains in China devastated many crops. All of this has a compounding effect sure to drive agricultural prices up as well as nitrogen based fertilizers. JJG and DBA are each taking a brief down turn because of the short term lack of demand of grains and commodities by Japan. Look for these to reverse once again to the upside within a few weeks. The US Grains Council has already mentioned several of the Japanese prefectures (Think states or counties) that will suffer damage to feed mills and livestock operations, not to mention their inability to get grains to and from various ports. Another broader play in the agriculture field of ETFs is MOO which tracks the lime of POT, MON, and DE. Even in this correction mode in the market, picking up a few of these might help round out a portfolio.

My son had a basketball try out tonight so we are running late so we will leave you with photo from last night's trailer trash get together. The four families impacted by the December flood get together almost every Sunday night to cry in our beer (or in our case usually some really decent wine. Last night we enjoyed a 2008 Rombeaur Zinfandel.) and compare contractor notes. If you look real close you can see the porta potty in the back round.

Salve Lucrum


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