The "No Amount of Bad News Can Bring This Market Down" Trades

As long as the S&P 500 holds 1350 there seems no stopping this market. You can throw bad news after bad news and it ignores it. So I am drinking the Kool Aid until/when we technically break down. In fact I can see a scenario now building where restaurants, retailers, and financials are LEADERS of the pack for 2nd quarter, especially if the dollar strengthens - it would be funny, but hey as long as the market is discounting all bad news from here to 2037, we might as well at least understand the psychology. And I keep coming back to the thought that inflation hits every finite asset including stock certificates, so if inflation is 15% in all things, then stock prices can remain elevated over true value by 15%.

I am buying more items in my see no evil, hear no evil state

1. Mosaic (MOS) seems to be holding that 20 day moving average. My fair value is $200. It would be wrong to not have this as my #1 position as I've had for months on end - so I bought more here in the mid $120s. Mosaic is now back to its rightful place at the top of the fund with a 5.1% stake. Welcome back home.
2. I've also increased Potash (POT) realizing that the stocks can still correct, but that naked feeling I've had the past 10 days without major fertilizer exposure is not a good one. Potash you get all the publicity but your still 2nd in my heart to Mosaic - hence you get half the allocation - 2.5% CF Industries (CF) - well I know you don't have potash in your mix but you deserve to at least be a 1.4% allocation and I'll enjoy reading about the same old, same old in your report - we smacked estimates out of the park, natural gas costs are rising, blah blah.
3. Have I told you how wonderful financials are lately? Morgan Stanley (MS) you are now going to a 2.8% stake. I am eyeing Goldman Sachs (GS) to join you because.... everything will be fine in 6 months, the Fed is now in your back pocket, and you guys are also stealth Asian plays as you work your multinational magic. Now that you've shredded the financial system of America it's time to conquer new lands. Until Goldman breaks out, I'll add more Blackrock (BLK)
4. It would be wrong to have Mechel (MTL) below a 2% stake so I had to buy back even more than what I bought yesterday morning.
5. Since any human on the planet will seem like a greenie compared to the current administration, I continue to build up the solar stakes in anticipation of November 2008 - Trina Solar (TSL) is my favorite "value" and Yingli Green Energy (YGE) pulled back to 50 day moving average nicely yesterday morning so I added to both.
6. You can't have solar without coal - they are like Simon and Garfunkel. More coal with Consol Energy (CNX) and Massey Energy (MEE).
7. You can't have solar, without coal, without natural gas - I am woefully underexposed so I added back to my Cabot Oil & Gas (COG) - it does not matter if Americans cannot heat their homes - as long as Indians are buying chicken nuggets and Chinese are buying Blackberries, the world of multinationals (and thus stock market) continues in bliss
8. I'm adding to my Indian copper play Sterlite Industries (SLT) which seems very undervalued with nearly $4 copper, and sitting in a country of 1 billion people who are going to be dominating the world in 30 years.
9. More iPath DJ Livestock ETN (COW) on this pullback to support - listen to the Tyson Foods (TSN) CEO on CNBC this morning - he said prices are going up MATERIALLY. Yes, go to that link and listen - I dare you. You laugh at me when I tell you, you are going to need a mortgage to BBQ this Labor Day. We'll see! More moolah for investors; more pain for consumers - but WHO cares about regular Americans. If they don't invest in the stock market, the powers that be could care less. More ethanol subsidies please?
10. Crude at $120? No problem. Food prices off the chart? Who cares. American consumers don't matter to multinationals. I'm buying retailer.... KIDDING! KIDDING! While I do expect retailers to put a 150-250% rise here since bad news doesn't matter, I refuse to buy them.  But if I had to you know which 2 - Walmart (WMT) and Costco (COST) - the pooring of America continues but the stock market is not Main Street - it is full of multinationals that could care less if you could afford to live... they have Asians, and Latin Americans, and Europeans, and Middle Easterners to line their pockets with riches. And Congressman to help on the other side (taxes) Nirvana!

Because I believe in the American dream I have cut back on my Ultrashorts in Retail, Financial, and Real Estate (commercial) because as long as we all close our eyes, sing Kumbaya - and BELIEVE it will be fine in 6 months... it can be. Or at least the stock market can keep staying up... it worked in September/October 2007 - we can do it again! Just believe.

Summary: You don't matter you puny American. You are 5% of the world population. With the other 95% of the world's population and especially the most important 40% in Chindia, our multinationals are going to rock the world. Yes they might cut jobs here and source them overseas but they are still good people, and make good profits. I don't care if you have to drain your 401ks just to pay for food, that's your problem... I have some Brazilians to worry about on how I am going to sell them some product.

And if you did matter (which you don't), let me just assure you everything will be fine in 6 months so go buy a house, get into the malls, and go eat out at Chipotle's. What's that? No, I don't want to hear that - no excuses. If you have to ....go borrow some money. It's worked like a charm so far!

Enjoy! And buy stocks! They're going up as the Indians, Chinese, Middle Easterners, Brazilians, Russians, transfer wealth by the day from your pockets. But that's your problem you silly American.

Comments

[ponchovilla]

I think you should be buying GM since they have a green 5800# YUKON for only $60,000. Also missing from your list is ABK and MBI as these must be screaming buys (I think most of the screaming is from folks who bought about one year ago)
Do you know of any good bicycle stocks? (gas above $4.00/gal)

[TraderMark]

poncho, good call on bikes! Maybe Nike is a good call here because people will need to walk to work? Doesnt that run out the tread on their shoes much faster?

I am also looking into mule play... you know for those trips to grocery store - need to put the bags on something, now that people will be priced out of cars.

Hey GM Is now an international play, sales in Asia and all. They don't need no stinkin USA consumer.

[bearfund]

The problem with buying banks is that they have to keep paying dividends to remain attractive to anyone, and they have to maintain capital at acceptable levels. While regulators are clearly willing to fudge "for the benefit of all mankind", the shell game can go on for only so long. Eventually dividends have to be cut or in most cases eliminated altogether, or the banks will be so obviously insolvent that even America's see-no-evil regulators will have no choice but to intervene.

I was starting to think about XLF at 22 and C was looking mighty tempting at 18. A few more percentage points down and I'd have been a buyer. But at today's prices the only way I can imagine making money on these guys is on the short side. You're right that the market isn't making much sense right now, and it's still true that it can remain so longer than I can remain solvent betting against it. That doesn't, however, encourage me to bet *on* it, either. I'm staying well clear of the "everything's going to be fine" plays and looking instead for value among companies that have had bad earnings figures but look good in a long-term stagflationary trend. You may well make money; good luck to you.

[TraderMark]

bearfund, I agree with you 100% intellectually

Unfortunately, this market is nothing related to logic. I am not touching the commercial banks here for reasons you listed. We have not even begun to discount all the bad loans coming related to the consumer. Just getting started here.

The i-banks are a little different animal - more towards the corporate side of thing and can be pseudo overseas plays.

I do expect a lot of regional banks to show serious trouble as we move through 2008 and into 2009. All the fuss so far has been with the big money center banks.

[edhaq$]

I am confused!! AND THATS BULLISH!

[DonaldRay]

I thought that was very informative and a funny article.

[nueronalysis]

Funny and right on article. It is good we held 2400 on the NAZ, but what do you think about S&P backing off the 1400 3 times in 1 week?

By the way, I have a small position in MSFT. any thoughts on it or on tech in general?
Have you looked at TNH for a fertilizer play?what about RIG?

[twoshooters]

“…In fact I can see a scenario now building where restaurants, retailers, and financials are LEADERS of the pack for 2nd quarter”

Actually, those were the leaders in the first quarter on a classic bear market bounce. The only “news” that’s you should watch for is the Fibonacci retracement to 38.2% and/or 50.0%. The rest is noise. The fact that your going long is the best signal yet that this bounce is done. And when the bounce is done, those 1Q bear market bounce leaders will be toast.

[GrantMe]

huh? all I can say is....where was all this knowledge when I took economics and investing classes a millenium ago? and you are so right about the attitude of "kick Americans to the curb"... when Dubya and his friends stood aside and let jobs flow to India faster than the Ganges River.....well doofus America is still running each other over in the Wal-Mart parking lot to get inside and latch on to the bargains. My most important question has two parts: 1. who are you voiting for in Nov 2. why?

[Kunst]

Floating down the peaceful river, a quarter mile upstream from the waterfall.

[cromag]

LOL great post

GrantMe: "1.who are you voting for in Nov? 2. Why?

Does it matter? The boy with the money just buy the sheeple votes or rig the numbers anyway. I don't think we the people have much say because the she lower IQ sheeple are easily controlled. Love the "running others over in the Wal-Mart parking lot" quote LOL

[Ames Tiedeman]

GM is a huge buy. GM is #1 in China and will gain big time in North America over the next decade.

[sapereaude]

Well, it's been a nice 200-year party, this Industrial Revolution. And it only cost us about 400 million years' worth of Earth's solar energy savings. Now let's go find us another earth, just in case the party broke us.

[wyoming]

The TRUTH to this article should make any proud American absolutely livid at our global exploitations and lack of concern for each other in what was very recently a fine nation.
come on guys. Getting rich on stocks is easy and you don't have to buy into all these companies that run ramshod over the voices of the poor and powerless.

[sunrises]

Hi Mark:

Do you know if MTL will have a pullback to low $100s? Someone else wants to buy this stock. Also, peg is high then isn't it better to sell rather than buy at this price?

Wouldn't MTL be considered expensive and better to wait on it's further pullback?

[TraderMark]

sunrises, that would be an ambitious target.
If there is a belief the dollar will rally huge, than anything is possible, but I'd be looking at the 50 day average in low $130s as a solid first time entry point. I've held this name a long time so I keep a core position and then trade around it, so my focus might be different than someone buying it the first time.

I don't think it's expensive at all based on its mix of business but maybe some others do.

[sunrises]

Hi Mark,

Perhaps, it may appear as an ambitious target. In contrary and in reality, it’s weighing out risks, availability of funds, offsetting the companies that are still down month after month. Many of us are waiting for a recovery of some these stocks; rather than, taking a steep loss. It’s a matter of believing :).

Yes, I know your longstanding position and recall the very nice article written last November which included MTL. Last Nov., I was new to the field and calculating with formularies the valuation numbers seemed expensive. If it’s possible for a pullback to $70-80s then my ambitious side would be thrilled to buy.

Until then, the low $130s, maybe a real start…thanks.

[sunrises]

Mark:

MTL has not given any earning reports to date for review. Little concerned for those who are entering now awaiting a pullback.