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Old 08-19-2011, 11:21 PM   Nav to Top  #1
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Money Shopping List for Market Close to Bottom

As much as my stress level was pretty moderate during the first leg down in this last four weeks, I started to cover my short positions after the first 9% down on the averages. My OpenTable trades did great shorting it twice over that period. I was short airlines for a week or two and also my shorts on the European banks. All of these were very profitable protecting my long positions. I also made a good bit of money on my VIX calls over the summer, but did not roll any over this August expiration. Because of that I have been penalized more than I had the first couple weeks. Yes it sucks, but I am still holding up pretty well with 21% in cash.

Now I have written that I am putting my bottom on the S&P at 1080 based on my fundamental analysis of S&P earnings for this year with a low multiple while expecting a decrease in earnings for the 500 companies between this year and next year. I personally think this is the worst case scenario for what I believe is our global economy. Yes, Europe is going to go into recession, but I just do not feel the rest of the world will. Credit is not an issue like it was in 2008 so contagion can't happen. That is the biggest difference between now and 2008.

Because of this, this is where it is most important to make your shopping lists and watch them closely. If they go down more, buy them. But do not buy all at once. Buy a quarter of a position and then if we go another leg lower buy another quarter position. If we get below 9500 on the DOW, start to double down! It is these types of overreactions where investors can make the most money quickly as long as they stay disciplined.

In today's market, I feel there are bargains everywhere! If the stock market was a shopping mall, it would be impossible to find a parking spot. But the retail investor thinks just the opposite. That is why it is hard for retail investors to beat the market. This is also the reason you listen to conference calls to see who is doing good and still dropping 30% after raising guidance. This has happened a bunch this last 2 months. My favorite name is Google. It is under 500 a share now after being over 600 just a couple weeks ago and it had an amazing quarter recording all time revenues and margins. Yes, they are really feeling the pain from Italy and Greece. Ford traded under $10 a share today. I bought some. Based on their international growth, their streamlining of products in North America and having the 2nd best CEO in corporate America, I feel it will be back to $18 in 12 months. I will take an 80% gain in 12 months any year! Southern Peru Copper has an 8% dividend and sells copper to China. This company is immensely undervalued while you get 2% every 3 months paid to you. I like that! Potash is now trading at $50 with a strong future potential. Regardless of countries defaulting or banks going bankrupt, the global food demand will outpace supply. This is the basis of long a long term investment. High growth names like Chipotle, Netflix, SodaStream, and Deckers are trading at very low levels. Even some high growth names in China are looking cheap. Names like Baidu, Sina, and Dang are all at 52 week lows when the Chinese economy is still on fire. The market is just not acting rationally right now and this is where an investor can make good money.

Good luck and Happy Investing!


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