BIG CAPITAL ADVISORS

Don't Fight the Tape - Don't Fight the Fed

2010-03-06T10:26:00.004-05:00

In my last post I laid out a road map of how to play this market. Since that post, several of the negative factors that I listed have turned positive. I have therefore let the stock market lead me into a more bullish construct. Here are some of the new positive factors:

1 - The Fed has symbolically raised the discount rate by a token amount and told the market that it will eventually raise rates. At the same time, the Fed indicated that their easy money policy will remain intact for quite some time. As a consequence the yield curve has steepened and the market knows that it has clear sailing for several months.

2 - Despite his apparent intransigence regarding his health care plan, President Obama and Congress have been forced to back down on their deficit building plans.
The Democrats may go down kicking and screaming, but the nation is not going to permit their left wing high spending agenda to pass. Also, the President's bank bashing has subsided. Finally, the country realizes that the Volker Plan is not a take it or leave it one dimensional cartoon. Rather, the country realizes that it is a sophisticated basis for negotiating a new set of rules for banking and risk taking.

3 - The tape has gotten stronger and market leaders such as AAPL, PCLN, CMG, etc., have broken to new highs.

The stock market is always reacting to evolving circumstances. Therefore, one should have an ongoing general thesis from which to play one's hand. By being flexible and not fighting the Fed or the Tape, one can adjust accordingly.

I believe that in this economic environment, one can not be a Nostradamus and predict where the market will be one to five years from now. We are not in the bull market of the 1980s and 1990s anymore. Rather we are in post economic crash 2010. As our Nation searches for a new direction, I believe that it will take some time before a new secular bull market begins. Instead we will witness many cyclical bull and bear markets within a trading range below the market's all time highs.

America is going through a process to find its way again. In my opinion, the following issues that must be addressed before we get back on track:

1 - We have to get our house in order by eliminating the budget deficit. This includes changing our personal economic behavior from consuming to saving.

2 - We must rebuild our eroding infrastructure of roads, bridges, railroads, and internet delivery. We are falling behind the emerging economies of the world in this area.

3 - Our pre university education system must be revamped to keep up with the rest of the world. In addition our immigration policy must work towards keeping the foreign students -who avail themselves of our great universities - in America. If we are going to teach them, we should incentivise them to work and stay here instead of allowing them to take our intellectual property elsewhere.

4 - Congress has to be changed. Our legislative system is antiquated and needs to be fixed. I'm not saying to junk the constitution and the balance of powers. I am saying that we have to come up with practical solutions to break the Congressional logjam and stop the non stop campaigning and food fight between the parties. As I have said before, our founders wanted change to be difficult. That is OK, but grinding to a complete legislative halt during a 21st century flat world light speed internet era does not cut it.

5 - America has always been a country motivated by exploration into new worlds and horizens - from "go west young man' to JFK's space program. We must regain our leadership in space exploration. JFK understood the need for being number one in space. President Obama's attempt to scuttle the space program in near sighted and foolish. He does understand what makes America tick. The space program is good business. Most of the scientific discoveries that we use in our every day lives came from the space program.

6 - Becoming energy self sufficient is priority number one. Green energy is good business. Therefore, whatever side of the global warming issue one believes in is not important. Even a five year old can see that there is a finite amount of fossil fuels and that carbon emissions are bad for the planet. If we don't want to depend on OPEC for energy, we have to come up with a full fledged energy program.

7 - We must ensure that we stay the world's leading economy and military power. Right now China and the East are kicking our butts. That can be reversed if we get our act together. The pro business Horatio Alger spirit must be our ultimate goal. We can be both pro business and pro regulation of business abuses. President Obama must understand that it does not have to be an either or situation.

At this time I am long selective stocks such as AAPL, CMG & MMR. At the same time, I still have a decent cash position and am cognizant of the fact that the market is extended on a short term basis. In fact, I am amazed that the market has run up this much on low volume without correcting.

Therefore, I will take profits in extended stocks and wait for pull backs to buy other stocks I like such as JDSU. I will also keep my options open to the idea of shorting the market via index ETFs if the market takes me there.

Where Do We Go from Here?

2010-02-15T14:48:00.005-05:00

The stock market has been going through a difficult corrective phase ever since President Obama took it upon himself to take the populist political approach of attacking the unpopular banks. Much has happened since that time to complicate matters. Here is my SWOT analysis of the issues facing the markets at this time:

Positive factors:

• Strong Monetary Growth. The pump is still primed and the system is awash in cash with no place to go. The stock market has always been joined at the hip with the money supply. I recommend reading Milton Friedman's Monetary History of the US and Beryl Sprinkle's Money and Markets.

• Positive Sloping Yield Curve. This is another indication of easy money, which always leads to positive economic developments.

• Fiscal Stimulus. This is a slight positive because the entire Federal spending program is an ill conceived pork barrel laden poorly targeted joke. Lord Keynes is probably rolling over in his grave and Milton Friedman is laughing from his.

• President Obama's Recent Conciliatory Tone of Compromise. Whether this is just a political gesture or the real deal is still not known. It is yet to be determined if the President is serious about compromise and listening to the obvious anger of populace as expressed by the polls, the Tea Party movement and the Massachusetts election results. So far the President has made conciliatory gestures which have been off set by political attacks on the opposition.

• Strong Corporate Earnings. Recent earnings reports from our leading corporations have been strong. Most importantly, earnings guidance has been strong. Of course, guidance can always be wrong. In my opinion, we must give the corporations the benefit of the doubt until evidence proves otherwise – especially given the strong growth trend that is in place.

Negative Factors:

• President Obama's stubborn insistence on large spending programs. Spending huge amounts on health care reform while cooking the books to make it look like we will be saving money is disingenuous and shows a lack of an understanding of basic economics. A nation cannot balance its budget and go on a wild spending spree at the same time. The much maligned Tea Party revolt has some very good points. The nation and the markets are revolting against a government that has apparently gotten out of control. The markets want to see the President back down from this unsound spending approach. We have to get our house in order or we will become a banana republic. Tough budgetary love is required. This will have as yet unknown economic consequences.

• Relinquishment of Presidential power to the Congress. The President has let Harry Reed and Nancy Pelosi dictate legislative policy. The markets want to see the President take the lead in proposing legislation. The markets do not want to see power hungry Congressional leaders with no economic vision or mandate for radical change control how our nation's budget is deployed.

• Broken legislative system. It is clear that our legislative system is not working. It may have worked 40 years ago, but it is not working now. Our founders wanted a system of debate and difficulty in enacting change. However, our country has now gone from difficulty to complete gridlock. The President needs to get a bi partisan commission of the best and the brightest in place to study the matter. He then has to propose an amendment to the constitution that breaks the log jam in a non pork barrel laden expedient manner that has input from both political parties. We are operating in a 21st Century light speed internet connected flat world. Our legislative arteries need to get unclogged and up to date.

• Toxic Bailout time bombs. Many of our states are already technically bankrupt and many European nations are in deep financial trouble. This is the next financial disaster that needs to be fixed. We can not quantify the size of the problem yet, but it is large and can become a huge drag on the world's economy. The question is whether the world will choose to bail out all of the troubled nations and states or work out a fiscally responsible (read bite the bullet) approach. A good first step is for Europe to admit that the hasty creation of the Euro was a mistake. That will enable European nations to tackle their individual economic problems without having to worry about propping up an artificial currency.

• China's monetary tightening. So far this is not a big deal because China is still pumping money into their economy at a breakneck pace. Stay tuned to see how this evolves, because China's monetary growth is unsustainable without causing all kinds of economic problems from inflation to real estate bubbles.

• Interest Rates are Starting to Creep Up. I believe that this will be a slow process that will have little short term affect on the markets. In many ways it is a good sign, because rates have been so low. Fed Chairman Bernanke acknowledged that he will have to raise rates in the not too distant future. This is an issue that must be monitored closely, but if handled properly is the right thing to do.

In sum, the world is now going through the aftershocks of last year’s monetary crises. Our politicians are caught up in a nasty game of recriminations designed for pure political gain. Our monetary authorities are under attack and the world’s economies are having a bit of a setback. It is going to take some time to work things out. Therefore, the markets are nervous.
My guess is that during the next year it is not going to be as easy to make money in the stock market as during the past year.

Therefore, until I see a true reversal back to the bull market uptrend, I will act as follows:

• Stay mostly in cash and keep my powder dry for long or short trading opportunities

• Trade the stock index ETFs with a downside bias every time I see stock market rallies that run out of steam.

• Go long selective special growth situation stocks such as CMG and MMR that are making all time highs despite the weak stock market. Conversely, go short very weak stocks.

I always start from a macro thesis and invest accordingly. The key is to be flexible and adjust as the facts evolve. I might start to change my tune tomorrow, but I will let the markets lead the way. If I start to see market leaders like AAPL, GOOG, PCLN, etc. start to run and make new highs, I will not fight the tape. If the President and Congress get their acts together, I will applaud and get more bullish.

Bull markets always climb up against a wall of worry. I have outlined the worries. Now lets see if they can be mitigated, one by one.

The Dichotomy of The President's Attack on Bankers and Paul Volker's Elegant Solutions

2010-01-31T02:12:00.014-05:00

Since my last post, the President's State of the Union Address reinforced Wall Street's fears of a President who is out of control and hostile to business. This caused the market sell off to escalate and plunge to a total breakdown.

On the surface, the President's address hit many of the right political notes for the crowd. However, when one digs deep, one discovers an illogical hodgepodge of half baked measures, gross inconsistencies, misstatements of facts, cheap populist attacks on convenient political scapegoats, and a denial of the fact that the country has rejected his healthcare reform plan.

Yes, the President threw a few bones to the Republicans in the form of offshore oil drilling, nuclear power plants and tax incentives for small business. But he continued his attack on the banks and his insistence of moving on with his dead policies.

Furthermore his proposed spending freeze makes no sense. One the one hand the President recently raised spending by 19% in the very areas that his spending freeze will cover a full year from now. On the other hand, the President proposed all kinds of spending increases in other areas that dwarf the so called freeze.

I could go on and on with examples, but the key takeaway from the speech is that markets perceive a president who still has not processed what has happened in Massachusetts and all over the country. Instead, the President keeps on talking about how he is now willing to work with the Republicans towards enacting his healthcare program if only the Republicans would just cooperate with him. As we all know, the problem is that the Democrats through Nancy Pelosi and Harry Reed have totally shut the Republicans out of the process. More important, the country has made it clear that they do not want the Presidents healthcare plan.

Furthermore, the President has continued to bash the banking system in Joe McCarthy like fashion. Next, President Obama hid behind Paul Volker as a cover for his hollow theatrical exploitation of the nation's anger at irresponsible bankers and the bailout. It was almost like Europe punishing Germany after World War One. That policy led to World War Two.

Then, just when I thought that everyone was insane, I read Paul Volker's tour de force Op Ed piece in today's New York Times in which he brilliantly laid out a plan to fix the world's banking system. The article contained none of the President's attack dog rhetoric. Instead, it logically reviewed the problems and offered a common sense long term blue print to fix them. I suspect that had President Obama read Paul Volker's article to the nation, the markets would have already rallied.

In my opinion Paul Volker was our greatest Federal Reserve Chairman because he had the courage and intellect to do what was necessary and unpopular to kill the massive inflation of the 1970s and then start the economic boom that ran from 1981 through 2000. After Volker retired in early 1987, he was succeeded by the irresponsible Alan Greenspan, whose policies led to the stock market and real estate bubbles and busts.

Now Mr. Volker is back. The question is whether the President will give us selective parts of the plan or the real deal. I am optimistic but also skeptical. Let me explain.

The reason for my skepticism is the well known fact that the President has kept an unhappy Paul Volker away from the inside for the past year. In my opinion, the President is using selective parts of Mr. Volker's plan for political gain. Despite that, Mr. Volker soldiered on hoping that the President would enact all of his ideas. He was visibly upset with the President when he recently alluded to his White House ostracism on the Charlie Rose Show. Then, White House economic advisor, Larry Summers neatly skirted around the "what to do about Paul" issue when questioned by Charlie Rose last Friday at the Davos world Economic Summit.

The reason for my optimism is that the President has no choice but to enact Mr. Volker's plan. The genie is out of the bottle and the entire who’s who of world banking and economics has seen it and will embrace it. Sooner or later, the President will also embrace the entire package and stop his bank bashing through selective cartoon like use of the plan. Maybe the President will continue with his populist rhetoric but enact the entire Volker plan, thus signalling to the markets that he is really doing the right thing.

The sooner the President wakes up and acts like President Clinton did after his health care set backs in 1994, the sooner our markets will recover. The Volker plan has a good chance of being the first step to get the President and the markets back on the right track.

Right now I am short the market via stocks like HOG and ETFs such as TZA - above right - which I am long because it goes up when the market goes down. I am looking to cover if the market "whooshes" down into some sort of selling climax. That may start to happen this week. There is no need to rush and no need to catch a falling knife in an attempt to be the hero who picks the exact bottom. At the same time I have selected special situation longs with very tight stops such as MMR, which just had the greatest natural gas discovery in the Gulf of Mexico in decades. The key is to have a short side bias , but trade around this oversold market in case it spikes up.

So step number one is for President Obama to let the public and our congessional leaders know the entire Volker plan. He must stop obsessing with the proprietary trading issue, which is not set in stone, and realize that Volker has placed all facets of banking system reform on the table for negotiations. The next step is for him to face the music, fess up to his mistakes and get his spending act together.

Presidential Anarchy Kills the Markets

2010-01-23T01:53:00.013-05:00

To say that the President and the Democrats have shot themselves and the markets in the foot is the understatement of the new century. In 1962 President Kennedy made the mistake of attacking the steel companies in order to get them to lower prices. The result was the 1962 mini stock market crash. Kennedy finally got the message and backed off, thus causing the economy and market to recover.

Now we have a stubborn liberal President and an arrogant congressional leadership that are both hell bent on destroying the banking system and the fragile economic recovery. In my opinion a combination of hubris and political ignorance has caused President Obama to ignore all of the polls and the Massachussets election results. Both the public and the stock market are sending the President a clear message that he is defying. To quote the great philosopher Yogi Berra, "Its deja vue all over again" and the consequences are dire.

President Obama was elected because of President Bush's unpopularity which in turn was caused by the Iraq war and the economic meltdown. President Obama said that he would be open with the American people and offered a reasonable alternative to Bush. He was not elected to delegate his leadership to Congress which has gone on a liberal healthcare spending spree based upon corrupt secret back room deals guaranteed to bankrupt the country "The President proposes and the Congress disposes" has long been the way that legislation has been enacted in America.

President Obama has no mandate to arbitrarily look for scapegoats in the business community, stop the war on terror and kowtow to our foreign enemies. He certainly has no mandate to go on a populist campaign for political gain without thinking about the consequences.

The stock market is falling off a cliff right now for the following reasons:

1 - After being repudiated by the voters of Massachusetts and in all of the popularity polls, President Obama decided to up the ante and go for broke in the healthcare controversy. In 1994 President Clinton had the good sense to back off his healthcare fight and live to fight another day.

2 - With signs of the inception of a fledgling economic turnaround and with still lingering high unemployment, President Obama decided to attack the banking industry using it as a scapegoat. Why on earth would any rational person try to kill the very industry that the economy so deperately needs for businesses to grow and prosper? The general idea of fixing the banking system is good, but the populist plan is bad and the timing is atrocious.

Hiding behind the great Paul Volker as his poster boy for change is very cynical. Changing the banking system should be well thought out and enacted over time. Slashing and burning the banking system at the very moment when the banks are struggling to help Americans get jobs is idiotic.

Even Democrat House Banking Committee Chairman Barney Frank agrees on that point. He has publicly stated that he will not permit the President's plan to be enacted. Furthermore, he has stated that he will make sure that any change will be enacted over a five year period. America needs a bi-partisan commission to study the issue and make prudent recommendations.

3 - To further complicate matters, the Congress has extended its Salem witch hunt against the banks to include Fed Chairman Bernanke. The guy may have been late to realizing the severity of the economic disaster of 2008, but once he figured out the severity of the situation he performed a yeoman's job. One can debate Bernanke's effectiveness, but to quote Lincoln, "you don't change horses in midstream." The markets are confident in Bernanke. More important is the irefutable fact that Alan Greenspan caused the economic bubble and ensuing disaster. He then very slickly retired and handed off the ball to Ben Bernanke just when he saw the what was about to happen.

So we have a very personable school smart President with no real street "cred" in business, foreign policy or economics. President Obama can have all the meetings with every expert under the sun to help him make decisions. But, without the experience, back bone and perspective of a person who has never run anything except for a law review, he is lost.

More scary, is that the President is on a mission diametricaly opposed to the centrist view of America that made us a great nation. He is a true believer with an enormous ego trying to make wholesale changes in our country without the consent of the populace. Moreover, the President appears to still be in campaign mode rather than governing mode. Somebody had better have the ability to speak to power and not be afraid of Rahm Emanuel or we are in big trouble.

The country and the markets are telling the President loud and clear that he is making some serious mistakes. The President is not listening. That is a recipe for disaster.

As a consequence I am mostly in cash and short the market via ETFs and special situation stocks such as Harley Davidson, which is going through a corporate sales and profits disaster. My only long position is RMBS which has just won some major victories on the road to collecting royalties for every DRAM computer chip sold by any company.

This stock market sell off will last as long as President Obama is asleep at the wheel. Let's hope that the economic recovery does not get destroyed in the process.

Its a Trader's Market - Yellow Caution Light for Big Cap Leaders and Averages; Green Light for Fast Traders

2009-12-03T21:03:00.001-05:00

Its the time of the year when the traders take over the stock market and the investors go away. Many institutional investors have already packed it in for the year, having made hefty profits. Most of the leading stocks like AMZN, PCLN - below - are extended and need to pull back and or rest. Other stocks like AAPL & BIDU - see the bottom of this post - are in bases but at extended prices.

On the one hand, during the period between Thanksging and Hannukah / Christmas / New Year, trading quiets down and seasonal strength kicks in for small cap stocks. On the other hand, the light trading makes the market vunerable to manipulation. Hence, I would not be surprised to see some vicious sell programs take the market down a bit. After all, if you are a large fund manager who has locked in large profits for the year, why not take the market down with some big sell programs. That way your performance will look even better relative to the market.

So its time to pick one's spots and trade only stocks that have extraordinary news and great charts. This is not a strategy for the faint hearted. RMBS - above - is an example of a special situation breaking out to new highs. It just broke out of a base on news of a settlement with Samsung and speculation that RMBS will settle its chip dispute with the rest of computer chip cartel. If RMBS settles, they will get paid an ongoing royalty for just about every computer and wireless chip in the world.

Investors should sit on their hands until they see the market leaders either pull back or break out of large bases. In my opinion extended stocks like AMZN & PCLN can go higher, but why not wait for a pullback rather than play a game of chicken?

At least, the extended Charts of AAPL and BIDU- above - are in nice bases. I would rather pay up for both stocks than risk further price erosion. If AAPL breaks out of its base and sets off my 208 price alert, it will be off to the races again. BIDU will have to take out 443 to set off a buy signal.

The reason for paying up in price is to reduce risk. That sounds counter intuitive, so here is the logic behind that strategy. The idea is to invest one's money into as much of a sure thing as is possible. If a stock breaks to an all time high from an intermediate term base, the stock is in motion to the upside. If a stock is still in the base, there is no guarantee that the stock will start to run up again. Rather, the stock might drift or go down. Hence paying up reduces risk.

Dubai Defaults - An Unexpected Exogenous Event Ruins the Thanksgiving Seasonal Strength

2009-11-27T03:10:00.000-05:00

We should have seen it coming because Dubai has been in trouble for quite awhile. Thousands of workers have fled the country for the past year and housing prices have crashed in this Middle Eastern make believe bubble town.

Then again, does it really matter that much? After all, Dubai is not in the same league as Citibank or AIG. Dubai's debt is only a piddly $80 billion - not the hundreds of billions that we have become accustomed to. So after the dust settles from the sell off in the world markets, I believe this will be a buying opportunity. There will be lots of scare talk about other shaky sovereign funds, but that's the way that these things always play out.

The more important question is not about Dubai. Rather it is about President Obama who is spending like a drunken sailor and trying to pass the Federal Deficit problem onto our financially insolvent States. The United States has all the monetary stimulous that it needs. However, the fiscal stimulous has been pathetic. Instead of optimal targeted spending that creates jobs for areas such as much needed infrastructure, Congress has passed a pork barrel laden hodgepodge bill.

Now the Congress is trying to pass the irresponsible health care bill and pay for it with higher taxes, deferred taxes, and more costs to burden the States. And the States are in deep trouble. California is unofficialy bankrupt, New York has very little money in the till, New Jersey hiked taxes and kicked out the Governor and the list goes on and on. The fiscal mess that our 50 States are in is the untold story on Wall Street that is going to be a fiscal drag on the US economy.

President Obama can not have it both ways by stimulating on the one hand and taking the stimulus away with the other. In my opinion a second pathetic fiscal stimulus package is coming somewhere down the road. Furthermore, the world financial authorities will have another round of talks to plug the hole in the dyke presented to us by Dubai. When all is said and done, the Dubai debacle will give an overextended market a chance to pull back into buying range. But its the 50 State dominos and irresponsible Democrat spending spree that is the real issue.

In short, its not time to hit the exits yet. Thanks to the Fed, there is too much money sloshing around. However, the day of reckonning will come in the ensuing months as the State's fiscal crises unravels and as President Obama's health care plan comes to a head.

Green Light Until Year End

2009-11-05T16:10:00.011-05:00

It looks like many of the leaders have either bottomed and are either in continuation patterns or broken out to new highs.

The Rebublican victories in the "off off" year elections have chasenned the Pelosi Reid spend our future away healthcare hawks. Also, the forecast from CSCO helped. In addition, the Fed has signalled that they will not be raising rates for quite some time.

So with the October mutual fund calendar year tax selling done, we may be headed into year end seasonal strength. This is not to say that we have started the next leg up for the averages - that can only be stated when the averages take out the October highs.

Rather, I am saying that we hit a short term bottom and individual stocks will be in play. I would prefer to see the averages build more of a base before the next leg up begins. So lets call this a year end trading rally for nimble traders.

We have had our 5% correction and my gut is that the bottom will hold through year end. That means that traders can play the breakouts in stocks like MELI or SLH.

We Nailed The Top - Now Its Time to Observe, Wait For The Dust to Settle & Be Ready To buy

2009-10-28T17:02:00.042-04:00

OK, we safely nailed the top and got out ahead of the sell off. Now its time to sit back and look at the signs to see just what this market decline is all about. Will this be a garden variety pullback or something worse. Throughout this posting are examples of great stocks that are holding up during the market decline.We are starting to hear a lot of talk about the the pressure on the Fed to reign in potential inflation and strengthen the dollar verses the Fed's need to continue to stimulate the economy. This conversation is going to continue over the next couple of years. The inflation hawk argument will get more press every time the market sells off Clearly the amount of stimulus so far has been greater than any time in history. And we all know the inflationary consequences of such monetary growth and budget deficits. We also know that this economic recovery is very tenuous. The banking system is still a mess and the stimulus money is only selectively getting through to corporate America.
Furthermore, as much as I think that President Obama may be the most likable charismatic guy in the world, he has lost control of the ship. He has accomplished nothing and is hell bent on a socialist agenda. He is under the influence of divisive pit bulls like Rahm Emanuel, Nancy Pelosi and Harry Reid. Now is not the time to bankrupt the country with an expensive health care agenda. Large budget deficits, Sean Connery and "the Chicago way" are not the answer.All of this means that the this is going to be a long drawn out process. In my opinion, whatever the duration of our march through the desert to the promised land, money must find a home - and excess money usually first finds a home in the stock market. There is still an excess amount of money in the system. We will learn how large the monetary base remains as Fed policy unfolds.
My job right now is to monitor both the overall market and individual stocks to see how they hold up. There is a difference between a healthy pullback and a breakdown. So far the stock market pullback has been healthy. On the other hand, some individual stocks have broken down - see PALM and SOHU below. Nonetheless, many individual stocks are acting fine.
I am in no rush to call a bottom and dive into the pool head first. I would rather let someone else be the hero. It is more prudent to stand back and observe how things unfold. If this stock market pullback does not get out of hand, there will be plenty of time to buy.

My gut is that the stocks that hold up and eventually continue to run will have to be very special companies. They will be the ones that are showing extraordinary growth with special products and services. Your average cyclical or mature growth company is not going to cut it for quite some time.

So forget CAT, DE, XOM, HAL, LEN, BN, and all the other basic engines of the old economy. The companies depicted in the above charts are not tied down to the general economy. They are in their own special growth worlds and will lead the way.

Here are examples of busted stocks that will not be around to reap the benefits of the next leg up:In short, if one wants to make money in this stock market, one must find the real sustainable growth champs. So now is the time to separate the men from the boys. People will talk about support levels, Fibonacci retracement numbers, moving averages and a whole lot of statistical mumbo jumbo.

It all boils down to the same thing. To paraphrase what Supreme Court Justice Potter Stewart said about pornography, If this market holds up, I will know the buying opportunities when I see them. And if this market breaks down, I will still be in cash to live to fight another day.

For all I know at this juncture, the market can turn back up right away or take several months to do so. I'll be on the lookout to see how the market leaders hold up. The more all time highs and fast snap backs, the better things will be for the market.

Market Finally Reverses - After Being Extended By Too Many Standard Deviations

2009-10-21T14:43:00.022-04:00

In my last post I said to sell into strength. Since then, Apple, Google and CREE have hit the ball out of the ball park and the Dow has gone through 10,000. Now it appears that the market has finally hit the wall and is reversing. Other than the above three stocks, many stocks are starting to correct - see IBM below left.

I am therefore sticking to my guns. I'm not saying that the ballgame is over. I am saying that by any technical barometer stocks are extended and need to pull back and consolidate.

The question is not "do I want to buy AAPL?" I do want to own AAPL. The real question is "do I want to own AAPL right now?"

As a short term trader I might play chicken with the momentum for some quick in out trades. As an investor or swing trader I must wait for the right entry point and the air is getting very thin up here. As per IBD, more stocks are extended above their moving averages (Pick your favorite one) than is healthy. One can not lose money by staying on the sidelines waiting for the right opportunity. It is better to be safe and wait for the fat pitch than get caught up chasing extended stocks in a speculative frenzy. Hence, I am making my list and waiting to see how things work out during a pullback. the key right now is to see how the charts of great stocks hold up.
Eventually the dust will settle and there will be a better buying point. From here on in one has to judiciously pick the right buying points.

9800 Top Target Reached - Time to Rest - Sell into Strength

2009-10-01T18:26:00.039-04:00

In my last post I suggested that the Dow could reach as high as 9,800. I expected to possibly reach that level by late August. Instead, the Dow reached that target in September, the seasonally weakest month of the year. Now we are in the dreaded seasonally weak month of October and the market is finally starting to act tired.
I still expect the market to do bigger and better things before the year end, but would not chase any stocks at this point in time. I would rather wait for some healthy consolidations and pullbacks to occur before dipping my toes in the pool again. There are many great stocks whose performance has not been affected by the economy. I suggest building a list of champions and waiting for the right time to buy them.

There is no question that the market has had a spectacular percentage bounce back from the lows. However, throughout history the market always has had spectacular bounce backs from the lows.

Since 1900, every time that the market has had a heart attack it has rallied back to its old highs - with the one great exception being the great depression of the 1930s. Sometimes the stock market has rallied to its old highs only to be repelled back down such as was the case from 1966 to 1982. Other times it has taken a while to get back to its old highs such as was the case after the 1987 crash. So which time is now?

I doubt that the stock market averages will get back to their all time highs very soon. Although there is plenty of monetary & fiscal stimulus in the system, it is going to take some time to get the economy back to health.

My gut tells me that the stock market is probably in one of those red periods as represented in the above long term stock market chart. But that does not mean that the party is over.

There are plenty of great stocks that are at or above their all time highs. Champs like AAPL, BIDU, CERN, NFLX, NTES, and PCLN are right there. I would pick my spots to buy stocks like these only after the market consolidates and starts to run again.

The easy money has been made. Now its time to pick great stocks like these and time one's purchase. There is no rush to jump in. Can the market go a little higher, before it pauses? You bet. But why play Russion roulette with Dow 10,000 at this point unless you are an in and out trader? It's time to sell into strength.

9,200 Target Reached

2009-08-02T00:11:00.019-04:00

The Dow Jones Industrial Average has now cleanly reached my July upper target of 9,200. The catalyst for the latest rally was a cluster of positive earnings reports from key financial and technology stocks. However, what is really fueling the market rally is the unprecedented growth of the money supply.

There is more money sloshing around in the economy than ever before- enough to launch the stock market to the moon. Throughout history extremes in monetary growth have always led to stock market rallies. Added to that is the trillion dollar fiscal stimulus package that the Federal Government has enacted.

For proof that money always leads the way one simply has to read two books: Milton Friedman's Monetary History of the United States shows the money supply plotted on a 200 year graph leading GDP by 3 to 9 months on average. Beryl Sprinkle's Money and Markets plots the same lead correlation between the money supply and the stock market.

All one has to do is look at the unprecedented growth of the money supply - presented by economist Arthur Laffer in the chart to the right - to see the extraordinary amount of monetary stimulus that is in the system.

The recent earnings reports by Goldman Sachs, JP Morgan Chase, IBM, Google, etc. attest to the fact that some of this money is getting through. This gives us hope.

Unfortunately not enough of that money is getting through to where it matters most in the economy. Rather, than being spent across the board, the money is still being held up due to the failure of the banking system to invest the money where it is most needed. In addition, the $1 trillion TARP spending has proven so far to be a poor allocation of fiscal stimulus.

From Wall Street's perspective, the money is being allocated in all the wrong places to no avail. Some examples include:

1 - Money thrown at the banking system that is not being spent on the economy.

2 - Vast pools of bailout money going to keep AIG and the Auto industry floating.

3 - An unnecessary health care package that will bankrupt our troubled economy.

In short, the Obama administration appears to be losing its grip on spending. The President is biting off more than he can chew - and the public knows it - to wit the President's sliding approval ratings.

Fortunately the Congress is starting to notice the inflationary implications too. With the dollar weakening and the long term price of gold hovering around all time highs, it does not take a rocket scientist to see that we are on the verge of screwing up our financial house. Thus, Congressional gridlock may rescue the economy and the stock market from the President's reckless socialist spending agenda.

The stock market as measured by the S&P 500 and the NASDAQ has actually made much more progress than the Dow Jones Industrial Average.

Both of those indices have broken through resistance levels and are now getting a bit short term extended. I would not be surprised to see the S&P 500 have a battle at the 1000 level. That would be a perfect excuse for the rally to pause and regroup during the dog days of August. Then again, there is enough momentum in this market to keep the animal spirits of this rally going

So my guess is that the lion's share of profits have been made in this phase of the stock market's rally. I would not be surprised if the Dow reached the 9700-9800 area. However, absurd headlines by Newsweek declaring that the recession is over are a contrarian's dream. Whenever the major periodicals put there stamp on the economy and the stock market watch your back!

My hope is that after the summer ends, the President puts the radical components of the health care issue on the shelf and gets more focused about fixing the economy. I think that he is very bright and for the most part is flexible in his thinking. If he is able to follow his political instincts and discard his Captain Ahab like quest of the health care white whale, the stock market should be fine. President Obama's job is Sun Su 101: fall back and regroup.

The Top of the Range? Close; Top of the World Ma? Not Yet

2009-05-22T14:29:00.016-04:00

The Dow Jones Industrial Average recently reached our minimum price target of 8,500. Now it is running into resistance. I previously had stated that the rally could reach a maximum target of 9,500 before correcting. I am now fine tuning that target to 9,000 - 9200 or so.

The 200 day moving average is around 9,000 and the Dow's January, 2009 snap back hit the wall around 9,200. A move to those levels before a correction would be a positive development in the long term market picture.

On a seasonal basis, while nothing is written in stone, the market has historically formed some type of short to intermediate term top sometime between mid July and late August. September and October - when many equity funds fiscal years end - are the worst months historically.

Since many money managers will soon want to lock in their large profits, it makes sense to anticipate the seasonal factors this year.

In sum, on a percentage basis, The stock market has had a huge rally from the March 2009 lows. On the other hand, this rally is very small when viewed from the market's all time high. I expect the March 2009 lows to hold, but I also expect some consolidation and correction to occur once the market finishes probing the 9000 - 9,200 level. That correction should begin sometime after July 15 into the dog days of August.

Once this correction is over, I expect the market rally to enter a new phase and go even higher into year end. However, one of these days in the future - maybe in 2010- the market may top out from a much higher level. Like Jimmy Cagney exclaimed in "White Heat" just as everything was about to explode: "Made it ma - top of the world!" the market may eventually blow up over the governments wildly inflationary policies.

GREEN LIGHT - ON DOW CLOSE ABOVE 8,000 NEXT LEG UP WILL BEGIN

2009-04-02T11:18:00.014-04:00

In my last post I raised my upside target for the rally to Dow 8500 - 9500. I said that we should stay invested but take some profits at my original rally target of 7800 - 8000 where the market should first pull back a bit before resuming the rally.

Now its about time to put that money back to work. No matter how insanely inflationary is President Obama's wild spending spree, the stock market has the green light for now. The death of the auto industry has been discounted by the stock market for ages. It is already baked into the cake.

The real key is that the government is finally doing something about the toxic assets in the banking system. In addition, the change in "marked to market" rules enacted yesterday is huge. Furthermore, the economy is awash in money in terms of money supply and fiscal stimulus. That money needs to find a home.

Possible pitfalls to the rally are always there. If North Korea goes haywire with their missile launch, all bets are off.

In short, all the Obama administration had to do was to fix the banking system and set up some focused stimulus plans. Instead they overreacted and initiated a poorly Pelosi Reid planned stimulus package. On top of that they have added all kinds of left wing deficit social spending programs. That is going to lead to problems down the road. But, the stock market is not looking at those issues now. It will later.

Raising Upside Targets - This Rally is Stronger Than I Thought!

2009-03-23T19:04:00.014-04:00

There is no getting around it. The stock market believes that this time the Geitner plan to fix the banking system is serious. Having nailed the bottom in my March 10th post and having predicted that the market would run into resistance at Dow 7,800 - 8,000, it is time to be flexible.

Therefore, I am upgrading my target to the Dow 8,500 - 9,500 zone. I know, that sounds insane, but the thrust of today's rally at the top of the trading range tells me that this market has more legs.

Having said that, I fully expect to see some profit taking kick in at Dow 7,800 - 8,000. After that it is not a great leap to hit the bottom target of 8,500 - especially given the breadth of today's rally and the extent of the government's economic stimulus.

Nonetheless, it would not hurt to take some profits from here on up, but I would now let some of it ride. The market can easily reach its 200 day moving average, its downtrend line and resistance levels all around Dow 9,300- 9,500 - and still look like it is at the bottom of the abyss!

Sell Into Strength as we Run Up To the Top of the Trading Range

2009-03-20T11:06:00.005-04:00

In my last post I noted that a rally had started and would probably run into Resistance around Dow 7800 - 8000. The Dow has now rallied to above 7500 and it is time to scale out of positions as we reach 7800 - 8000. The market has had a nice bounce and is approaching the top of a trading range. It's time to be thankful and take the money and run.

The key to this market is for the government to stay focused and fix the banking system. All of the mob psyhcology surrounding AIG and Bernard Madoff are distractions. People are entitled to vent, but they are venting at equivalent of a garden hose compared to Niagra Falls. Everyone is pointing fingers at everyone else. The press and the Congress blame Timothy Geitner even though the AIG information was available to all of Congress had they just taken the time to read their own pork laden plan. Nero fiddles while Rome burns.

In short,The Obama administration has got to focus and take the bull by the horns. They have tried to do too many things at once, such as fix our health care, education and energy policies. All of those things are good, but not until the banking mess is fixed.

OVERSOLD UP THE WAZOO - RALLY

2009-03-10T10:14:00.004-04:00

An oversold rally has started this morning. The market may have put in a short term bottom. Market psychology has reached unprecedented levels of fear and the rubber band has been stretched to the limit on the downside.

Chairman Bernanke's soothing talk this morning has finally given the markets some hope that the Fed is starting to wrap its hands around the banking system problems, although he waffled on the marked to market issue. I'm from Missouri with regards to Bernanke, but any excuse could get the market to rally at this point

My gut is that the market will establish a new trading range with yesterdays low as the bottom. The market will eventually establish a high for the trading range of say 7,800 - 8000 and then gyrate until it gets more clarity about the future.

Stock Market Valentine - Not!

2009-02-15T13:34:00.015-05:00

ITS THE BANKING SYSTEM STUPID!

We all know what it will take to turn the economy and the stock market around:

First and foremost, fix the banking system. Unclog the arteries and get capital flowing again. Send the auditors in, find out where the skeletons of hidden debt lie, get rid of the bad banks and make sure the good ones work.

Once our banking system starts to work again, the entrepreneurial nature of our economy will start to work. The creative destruction described by Economist Joseph Schumpeter will mean that new businesses will replace the industries that were ravaged during the current economic downturn

Second, provide some sort of intelligent responsible fiscal safety net for the economy. The current $860 billion stimulus package about to be passed by the Congress is not the answer. Instead of permitting the Nancy Pelosi Harry Reid pork laden hodgepodge spending spree to occur, President Obama should have taken the bull by the horns and stood up to all members of Congress with his own well thought out plan. He certainly had the mandate to do so.

In our system "the president proposes and the Congress disposes."
Unfortunately that has not happened, so we are months into the economic crises with no realistic plan in sight. As a result, the stock market is drifting down at the bottom of it's trading range.

The stock market turnaround template is still in place but is looking wobbly. .
In order to turn around, the market has to see for real that the banking system is being fixed. Then the market can look above to the various Resistance levels at 9000, 9700, the 200 day moving average and the downtrend lines. Instead, the Dow is on the balls of it's ass in some sort of declining right triangle type pattern. Cleanly break through the October and November bottom and down we go again.

The Template

2008-11-23T02:43:00.031-05:00

Here is a long term chart of the US Stock Market. All the great Bull and Bear markets from 1900 are included. The Panic of 1906. the 1927 Crash, The 1987 Crash, the 1970s twin bear markets, etc. -They are all there.

Throughout history almost every bear market bottom has been made after the stock market has formed a base. Markets do not turn on a dime.
The fabled spike "V" shaped bottom is a rarity that I have never seen. Rather, market bottoms form after the market traces out some sort of pattern such as a double bottom or a head and shoulders reversal.
Lets look at some examples starting with the Kennedy Mini Crash of 1962. As one can see, the market fell off a cliff when President Kennedy tried to muscle the Steel Industry with price controls.
The market snapped back as fast as it fell, but only after putting in a double bottom. The bottom was put in only after the following steps occur ed:

1- The market dove to an initial spike low

2-The initial low was followed by a run up to a trading range high.

3-The market then faded a retested of the lows.

4- The market then exploded to the upside taking out the the trading range highs set by number 2 above. A classic double bottom.

Now lets move to the ugly twin bear markets of the early to mid 1970s. The 1970 Bear market culminated with Bankruptcy of our largest railroad, Penn Central. This was immediately followed by unprecedented emergency actions by the Fed to pump money into the system.
The bailout (Nationalization) of Penn Central and the loose money policy of the Fed, saved the day. The market put in a double bottom and then a huge multi month head and shoulders reversal before it rallied.

The 1974-75 bear market caused by Watergate, the Viet Nam War, Gasoline crises, inflation, etc. culminated with a huge double bottom. Just like 1972 the same 4 steps were put in before the low was in place.I can go on and on with examples of market bottoms including the 1987 crash. The key point is that every major market bottom goes through a similar process. So lets look at today's ugly market.

Step number one on the road to recovery would be for the Dow Jones Industrial Averages to reach their mid November reaction high around 9500-9800. That would break the sharp downtrend that began in September and would hit the wall at obvious an Resistance level.

Step two would be to pull back and again retest the lows. This retest would hopefully make a much higher low than last weeks low. That would set the stage for a year end or new years rally to retest the 9500-9800 resistance level. This time the averages would hopefully blast through the resistance level to new highs. That would be the first major step in forming a bottom. The next step would be to break each and every downtrend line in place since the start of the bear market. That includes taking out the 200 day moving average.

The major point of my post is that market bottoms take time to form. Anyone who buys the market after a base is formed may miss the first 5% or 10% of the move. However, I would gladly give up that small percentage in return for making a much higher percentage trade that captures the vast majority of a bull market rally.

"AS GM Goes So Goes The Market - Ugh!

2008-11-19T20:09:00.015-05:00

The old saying used to be "as GM goes, so goes the market." For decades, many analysts used the GM bell weather theory to determine if we were in a bull or bear market. Well folks, GM along with Chrysler and Ford might be about to be flushed down the toilet.

I have been repeating over and over that "the October 10th bottom will hold as long as there is a fact based belief that the US and world governments have done - and will continue to do - what is necessary to stop the financial crises." Right now it does not look like the US and world governments are doing their job

On the home front, Treasury Secretary Paulson says that things are OK, but is not spending the $700 million that Congress gave him with a sense of urgency. Indeed, half the funds are unspent and Paulson keeps on changing his plans. On top of that, we see the entire US auto industry's fate being kicked back and forth in a Congressional debate.
Finally, we read that the USA has taken a back seat at the recent World Economic Summit.

This is not the way to keep the momentum going. Therefore, the market is starting to fade again. Unless the government gets off it's indecisive ass, this market will crack the October 10th lows. I can not believe that am actually wishing that President Elect Obama gets sworn in sooner rather than later.

Right now deflation is rearing its very ugly head while Nero fiddles. I am no socialist, but I believe that we have no choice other than to save the US auto industry at this time.

Dear Congress: Stop arguing - earmark the $35 billion for the big three and put strong enforcement provisions into your legislation. Dear President Bush: Cut a deal with President Elect Obama to jump start the economy by spending the remaining $350 billion NOW!

It's time to sell one half of our longs, which brings us net net flat. We are now 20% long high alpha stocks and 20% short the SPY. I am not saying that we are definately taking out the lows. After all, this is the 21st century and our leaders can't be dumb enough to blow their chance to save us - can they? Don't answer that! I am saying that we might take out the lows, so when in doubt - get out.

Testing the lows

2008-11-13T12:53:00.009-05:00

12:53PM:

The stock market is testing the Dow 7,800 low right now. As I said in my last posts, If the market does not believe that the government's plan to save the economy is working, then the market will break the lows.

Right now Treasury Secretary Paulson has not given us much to believe in. After starting out as a bull in a China shop, the Fed and Treasury department's plans are starting to show chinks in their armor. Paulson appears to be hesitating and waffling. The last thing the markets want to see is the government wavering on their original plan.

We shall have to see if President Bush will save the day when he speaks later today. In any event, I think that there is not enough bad news to make the market crack.

7:45 PM:

President Bush to the rescue! Some reassuring words from GW and the market bounced off the November 10th lows to make a 900 point reversal to the upside. The base remains intact and the lows hold. It's back up to test the highs of the trading range. So far so good, but I am adding a 20% SPY short to our portfolio.

Nailed it! - so far

2008-11-02T11:59:00.020-05:00

In my last post I called an "audible" buy at the gap down opening. So far that has proved to be the exact bottom of this ugly bear market. In my opinion that October 10th bottom will hold as long as there is a fact based belief that the US and world governments have done - and will continue to do - what is necessary to stop the financial crises.

Therefore, only if liquidity crises tsunami continues to wipe out all liquidity will the bear continue.
To date, all evidence points to the liquidity crises abating. One only has to look at the collapse of the "TED Spread" to see how effective the full court press of Paulson, Bernanke and company has been.

Can the bottom be taken out? You bet your sweet ass it can. However, the heart attack patient is almost out of the Intensive Care Unit. In my opinion a basing process will take some time to unfold. That might mean testing the lows over and over again. We may see the October 10th low pierced only for the market to snap back. We also may see higher lows as time unfolds

My gut is that the top of the base will probably be roughly in the 9,800 to 10,000 zone. That is the where the upper Bollinger Band is and where the first snap back from the low hit the wall..

The question therefore is how do we proceed from this point on. In my opinion the answer is to cautiously allocate more assets into the strongest stocks. That means buying a handful of champs - such as AFAM, EBS & LG - that are making all time highs and have extraordinary revenue and earnings growth. That does not mean making big index based market directional bets.

I believe that it is going to take a long time for the market to significantly recover. Therefore, I am adding another 20% longs to the 20% that I purchased on October 10th. We are now past the September - October period of seasonal weakness and going into the year end period of seasonal strength.

Furthermore, A likely Obama victory is already factored into the market averages.
Despite my fears of Obama being a radical liberal President, it appears that Obama could be more of a cautious centrist than I envisioned. Maybe Obama's recent prudent centrist approach is just political pre election posturing. Hopefully it is his real nature.

Nonetheless, my fears of a socialist president and a left wing Pelosi Reid controlled Congress may be checked by the reality of the situation on the ground. My hope is that they realize that they do not have the money to spend on their agenda. Henceforth, they will be tied up in a straight jacket of inability to enact radical legislation.

In addition, the next president will have some help on the foreign policy front. The collapse of the price of oil will hurt the ambitions of Russia and Iran. Ironically, the apparent victory in Iraq will serve to help a President Obama by stabilizing the Middle East. That can only be good for the markets.

Calling an Audible!

2008-10-10T09:45:00.004-04:00

The market gapped down 700 points. I'm calling an audible and scaling in. Time to buy! I have initiated a 20% long position with the averages down 700 points on the gap down opening. I expect plenty of volatility and retesting of the lows. There will be lots of time to scale into longs.

I have a mental stop loss at my entry point with Dow minus 700. Like Paul Tudor Jones said, he probes many times before he sets the hook at a real bottom.

Man looks into the abyss

2008-10-09T22:19:00.012-04:00

We are there. We are at the point that all great traders dream of. The point when the world appears to be coming to an end. Between now and some ridiculous point below here lies the bottom. It may be just another short term bottom or something more significant.

All I know is that the rubber band is stretched as far as I have ever seen it. shades of 1970 and 1973-1975. Mini shades of 1962. Shades of 1929.

What I see is the following: The world's governments get together and figure out a way to get the credit markets working. Some sort of way to stop this ugly LIBOR TED Spread scenario that will open up the flow of capital and stop the forced selling of stocks.

In the meantime as a trader, I am waiting for the big kahuna gap down. The 500 to 1000 point down opening. The bet the ranch opportunity to route the bears and the forced selling. I do not know if I will get it. All I do know is that somewhere between here and say 7000 I will be ready to call the bullish audible and go ape shit on the long side. Its either that or the Wiemar Republic.

I am not Pollyanna, but I doubt that we will get the bad end of the World result that everyone is fearing. As ad hoc as it may appear, the world's governments are slowly but surely doing all that they have to do. We'll string up the bastards who caused this later. New rules Will be put in place and all will be well.

So start making your list of great companies who will excel during the abating of the storm. Buy when there is blood on the streets. We are in the zone and the time is approaching.

A Bottom or THE Bottom?

2008-09-20T15:13:00.046-04:00

Last weeks economic and stock market fireworks culminated with the US Treasury Department and the Federal Reserve Board
letting it all hang out with a do or die effort to stop the
financial crises. Anything goes as Treasury Secretary Paulson and Fed chairman Bernanke wing it to stop the bleeding

So far the financial markets like it - at least they like it enough to spike back up from some serious declines.
What we don't know is if they like it enough to put in a real bottom. So let's look at the evidence. As we can see by observing the above charts of the Dow Jones Industrial Average and the S&P 500 Index, stocks are still in downtrends and are below there long term moving averages and obvious Resistance levels.

So step one would be for the Averages to at least reach their recent reaction highs.

For the Dow Jones Industrial Averages that would be around 11,800. Step two would be a basing process that might involve a retesting of the lows. All of this is to say that there is no rush to jump right in to this market. Last Thursday might have been A low but in my opinion it was not THE low.

Other interesting signs have been the weakness in the China Stock Market, the strength of the dollar and the weakness in

commodities. My gut take on these developments is that they are counter trend movements against long term trends.

Having said that, the huge decline in the China Stock Market has been nothing short of startling. The Chinese market has lost around 75% of its value.
It is a sign of a weakening of the world economy. It is a trend that started before the US Stock Markets started its decline. Meanwhile, a surprising number of stocks have shown tremendous strength during the recent stock market decline.
Many of these champs have run back up to their all time highs or made new all time highs.
The one thing that these strong stocks have in common is extraordinary growth. Their sales and earnings have been growing at rapid rates. Thus, most of these stocks have Investors Business Daily EPS ratings of well over 90. Stocks like APEI, CNQR, ENSG, ESRX, SCL, WBSN, TRLG are tearing up the tape. They are oblivious to what the general market is doing.
They "rope a dope" the market by hanging tough while the market falls and then jump up at any sign of stock market strength These stocks are typical of the IBD 100 leaders and I am comfortable buying a basket of them as a small 20% portion of a portfolio hedged with an equal amount of index shorts right now

All of these companies are growing despite what is going on with the economy. So stock picking the alpha elite champs is working no matter what is going on. There are more examples that I can provide. Just look at the ticker tape above to see them.

Solar Energy

2008-08-17T16:02:00.025-04:00

The price of oil is directly related to the price of every type of alternative energy. Some alternative energy sources have a much tighter correlation with the price of oil than others. For example, as we can see by viewing the chart to the right, the price of natural gas has a very tight correlation with the price of oil. On the other hand, as one can see by observing the chart at the top of the page, other alternative sources of energy, such as solar power, have a much looser correlation with the price of oil. Indeed, the price of solar stocks collapsed in fear as the price of oil corrected.

I could supply other examples, but the key point is that the break even point of most alternative energy prices is tied into the price of oil. Other factors that apply to alternative energy sources are how "green" the alternative energy source is, what the regulatory environment is, and what tax incentives apply.

The most successful solar companies, like First Solar, concentrate their business in large international clients located in areas with lots of sunshine.
They use low cost thin film cells which are cheaper than the more efficient silicon based cells. According to First Solar, they will reach parity with traditional electricity in two to four years.

This brings us to the crux of the matter. In general, it does not yet pay to be a solar power company unless you play your hand like First Solar. If you are making high priced silicon based solar cells, you are not going to be profitable for a while. Right now, companies are installing solar power when it makes economic sense. That means huge installations with government tax incentives.

Thus, there are four basic reasons to go with solar power:

1 - The price of oil gets high enough to make Solar economical. Right now the price of oil has had a vicious correction in what most analysts believe is a long term secular oil bull market. To the extent that oil stays down at current prices or below, it will be a disincentive to produce solar power. Hence the vicious correction in most solar stock prices.

2 - The price of solar components becomes less expensive. To that end, traditional semiconductor manufacturers are retooling their factories to make silicon based solar cells. As more and more semiconductor solar factories come on line the cost will drop. Thus, the price of Suntech Power - to the right - has dropped as competition to produce solar cells kicks in.

3 - Governments give tax incentives to invest in solar power.

4 - People pay for solar power because it is part of the green revolution.

In sum, investing in solar companies is very risky at this point in time. Very few companies have strong track records like first Solar. Therefore, every time the price of oil drops most solar investors get scared and bail out. Any new solar ventures must recognize that although the market opportunity is enormous - solar accounts for less than 1% of all US power - the risks are many.

Over the next few years the cost of producing solar cells should drop rapidly as Moore's Law comes into play. In addition, the price of oil should eventually start to rise again. When these two economic events occur, the risk inherent in being a solar energy manufacturer will abate and the opportunity will rise.

Right now, it only pays to invest in the First Solars of the world. Any investment in solar should be measured against the First Solar model. Low cost components for large installations for huge international corporate customers. Not high cost components for the not yet ready for prime time individual home owner.

Don't Fight the Fed - This Just Might Be The Bottom

2008-04-05T13:54:00.021-04:00

Read it and weep folks. CHANGES IN THE MONEY SUPPLY ALWAYS LEAD CHANGES IN THE STOCK MARKET. The stock market in turn then leads the economy. My apologies to Paul Samuelson,

but changes in the stock market typically lead the economy by anywhere from 3 months to one year on average.

Sometimes it takes allot longer for monetary stimulus to kick in. Just look at 1981 - 1982 when it seemed like the Fed was pushing on a string. But eventually things work out.

Thus, when the economy looks the gloomiest and the money supply is growing rapidly like today, it may be time to buy stocks. Last week's bad unemployment report might not mean anything to the stock market, because it is old news.

Please take note of two great books. Nobel Prize winning economist Milton Friedman - the greatest economist of the twentieth century IMO - famously wrote a big fat book plotting the money supply verses the US economy. Going back to the 1700s Friedman showed that changes in the money supply lead changes in GDP by 3 months to one year on average. He actually plotted money vs GDP going all the way back in time.

Beryl Sprinkle, former Under Treasury Secretary in the Reagan administration did the same thing for the stock market. He plotted money supply vs the stock market and came up with a 3 month to nine month lead effect. His point was to buy stocks when the money supply started turning up again.

Last week the following headline seemed to go unnoticed: "M2 Soars to record levels." The Fed has taken the credit crunch on head first and as a result the broadest measures of money supply are soaring. Marty Zweig famously said "don't fight the Fed" He proved this with data going back to the year of the flood.

In sum, the Fed is telling us something today. Money supply is growing like a weed. Interest rates have plummeted. The dinner bell is ringing.

Many leading stocks such as railroads, Natural gas, copper, momentum growth stocks, etc. are running. I therefore have to ask the logical question -Why are many of these stocks making new highs? Why are others ripping all the way back towards new highs?

Baskets full of stocks do not make new highs in a lousy market. The railroads, coal, steel, agriculture, natural gas and other energy stocks are all at new highs.

I am not 100% sure that the bottom is in. But I think that there is a very good chance that it is in. Right now the economy is awash in money. At a later date, God forbid it becomes apparent that the Fed stimulus does not work. Nonetheless right now things are coming to life.

I would be long FSLR and RIMM which are both making runs at their all time highs. Their businesses are exploding. I would add POT to that list as the "ag" boom shows no signs of letting up. Copper is at its all time high and RIO is the best of breed. I would buy RIO now.

I would also add to PBR. Petrobras is sitting on the largest oil discovery on the planet Earth. They are now almost ready to deploy the technology needed to get to the oil situated 20,000 feet under the sea.

Way Station or Bottom?

2008-02-24T14:16:00.027-05:00

Everyone agrees that the sub prime crises has caused the stock market to be in trouble since the new year began. The lack of liquidity in the economy has forced institutions to seek capital wherever they can get it. Until recently the Federal Reserve has been behind the curve and of no help. Without the help of the Fed, selling stocks has been one of the major ways for financial institutions to raise capital.
Recently, the Federal Reserve has gotten the message and has opened up the monetary spigot. As a consequence, the economy is awash in liquidity and the stock market has stopped falling.

The sixty four thousand dollar question is whether it is too little or too late to stop the bleeding.

Even more important is the question of whether the recent interest rate cuts matter that much. Perhaps the Fed's interest rate cuts are not targeted where the funds are most needed.

As Clint Eastwood said, "do you feel lucky punk?"? Do you think that the rate cuts will get the economy back on track or will they only mitigate the damages? Does the economy have to suffer the downside consequences of the business cycle?

In my opinion, nobody has the answer yet as to whether the Fed can save the day or is just pushing on a string. Therefore, the safest way to deal with the situation is to be mostly in cash, but to be long the hand full of growth stock champs that are at all time highs. One can get market neutral, by offsetting the longs with ETF market index shorts.

Specifically, I want my portfolio to be only 25% long in only those stocks that are exhibiting extraordinary growth and are at all time highs. PBR, POT, PCLN, and CMED all fit the bill.

BUSTED!

2008-01-08T19:33:00.000-05:00

I will let the official score keepers and historians define this market at a later date. From my point of view, we are in a bear market. Today all the major averages have broken below important support levels.

I am getting that sick old fashioned bear market feeling. It's that feeling that the economy has to pay it's dues. It's that Alan Greenspan stuck Ben Bernanke with his mess feeling. It's that May 1970 Penn Central bankruptcy emergency may need to happen before the Fed can save us feeling. It's that 1981 Paul Volker made us pay our dues but then the Fed was "pushing on a string" feeling.

I do not know how far down we will go or how long it will take. I just know that playing defense and preserving capital are my watch words.

There is no doubt that market is oversold and could have a Bernanke rate cut based snap back soon. However, judging from Bernanke's past behavior, he will not give the market enough to stop the slide. The market simply does not have confidence in the Bernanke Fed. Moreover, even if Bernanke showed a real sense of urgency about staving off recession, I'm not so sure he can do anything about it.

Therefore it is time to stay short via positions in the QID and SKF. Longs can be taken in selective stocks like PBR with its monstrous offshore oil discovery or ESRX with it's recession proof growth story intact.

Santa Claus Rally

2007-12-26T15:01:00.000-05:00

Forget the averages. The way to play the last week of the year is by playing breakouts and momentum in individual stocks.

For the most part, the cat is away so the mice will play. In this case the cat is the institutional investor

As a consequence, I want to play breakouts and moves in momentum stocks like BIDU and MELI. The markets are thin, so I am scalping the profits wherever I can.

In MELI's case, the chart is getting extended, but probably will pop for another day or so. So I am playing the quick trade and then will look to reenter on a pullback early next year. MELI is growing at over 100% compounded annually. Stand back Buenos Aires!

Outlook for this week: The Bernanke Blues

2007-12-16T22:01:00.000-05:00

Paging Ben Bernanke! You are too easy to make fun of. You seem like you can not make up your mind and you keep on sending mixed messages to us mortals. I’m sorry Ben, but your patented Bernanke apethetic flip flop has now gotten to the point where we simply do not trust you anymore.

Ben it you are out there, I have said this several times before. If you think that the economy has to go through the natural course of events and go into a recession then say so. Be a man like Paul Volker. If you think that the sub prime crises is serious then say so and take action. Be a wus like Alan Greenspan and get it over with already. But for God’s sake tell us who you are and let the markets follow your lead.

That little flip flop you pulled last week screwed a lot of people. On Tuesday you threw us an anchor with your quarter point rate cut and indifferent statement. Then on Wednesday morning you acted like you cared. However you came to pick up thousands of shipwreck passengers with one measly canoe. I mean really Ben, that international bailout package was a joke.

So here I am looking for the seasonal year end strength that might not come this year. Therefore, until your next flip flop, I think that the best policy is to sit on cash right now. I will wait for a better moment to buy any of my portfolio stocks. My advice is to play for quick special situations right now. I don’t think that any market sell offs will be to great so the best policy is to sit on my hands.

Portfolio Stocks:

1 -ABB - ABB is a great growth story in the world wide construction boom. ABB. ABB is a long term buy and is in a case.Investors can scale in now. Traders might wait for a base to form with a later breakout.

IBD ratings - EPS 99, RS 95

http://stockcharts.com/h-sc/ui?s=ABB&id=p96955353181&a=116242913&listNum=2

2 – AAPL - Apple is a phenomenon that has now pulled back enough to consider buying. Their growth has been amazing but China is now beckoning the I=Phone and the Mac is finally making inroads into mainstream computing. As much as Apple has grown they have more to go and this quarter is going to be a knockout. I’d wait for a pullback to buy

IBD ratings – EPS 99, RS 99

http://stockcharts.com/h-sc/ui?s=AAPL&id=p96955353181&a=109244170&listNum=2

- BCSI - Had great earnings and is a buy popping over $40. I strongly emphasize waiting to buy because right now BCSI is acting poorly. Do not bottom fish BCSI.

IBD ratings - EPS 97, RS 98

http://stockcharts.com/h-sc/ui?s=BCSI&p=D&yr=1&mn=0&dy=0&id=p96955353181&a=114635931&listNum=2

3- BIDU – The Chinese Google is in the early stages of phenomenal growth. Lets see how BIDU consolidates during this crummy market before we buy it..

IBD ratings – EPS 99, RS 99

http://stockcharts.com/h-sc/ui?s=BIDU&id=p96955353181&a=110462947&listNum=2

4 -BOOM – BOOM blows things up to make specialty metals. This high tech company has shown steady growth over the past few years. It has had a healthy pullback after blasted to the moon. I would buy at the first sign that the market is coming back to life

IBD ratings – EPS 93, RS 97

http://stockcharts.com/h-sc/ui?s=BOOM&id=p96955353181&a=123308006&listNum=2

5 - CMG – CMG has saturated less than one half of the USA. This is a great cookie cutter growth story that has several more years to go. CMG has pulled back a bit after making another all time high. I would buy it now if the market would only show some life.
IBD ratings – EPS 95, RS 97

http://stockcharts.com/h-sc/ui?s=CMG&id=p96955353181&a=115691691&listNum=2

6 – FSLR – First Solar is the number one growth monster of the solar group. Wait
IBD ratings – EPS 80, RS 99

http://stockcharts.com/h-sc/ui?s=FSLR&id=p96955353181&a=122638593&listNum=2

7– GME – GME is growing like gangbusters, has had a great holiday season, and has a great long term chart. GME broke out to an all time high last week only to fall back in the base. Buy breaking back out with a tight stop.

IBD ratings – EPS 96, RS 97

http://stockcharts.com/h-sc/ui?s=GME&id=p96955353181&a=121358827&listNum=2

8 – GOOG – GOOG is pulling back again with the market. Buy taking out the recent reaction highs within the base or breaking the all time highs.

IBD ratings – EPS 99, RS 91

http://stockcharts.com/h-sc/ui?s=GOOG&id=p96955353181&a=109244171&listNum=2

9- ISRG – The Da Vinci robotic surgical system has taken the medical world by storm. ISRG is still in the early stages of growth. ISRG chart looks a little tired so I would wait to see how things develop

IBD ratings – EPS 99, RS 99

http://stockcharts.com/h-sc/ui?s=ISRG&id=p96955353181&a=115545317&listNum=2

10- PBR – is forming a beautiful base. The Bollinger Bands are getting tighter and I would wait to buy popping out of the consolidation

http://stockcharts.com/h-sc/ui?s=PBR&id=p96955353181&a=122969715&listNum=2

11-RIMM has been beaten up and is on the ropes. RIMM needs to right itself and consolidate before I would consider buying. Wait to see how the chart develops.

IBD ratings – EPS 99, RS 99

http://stockcharts.com/h-sc/ui?s=RIMM&id=p96955353181&a=110501985&listNum=2

12 RIO – RIO is going through a consolidation period. The long term growth and value story is still intact, but RIO is consolidating like all the metal stocks

IBD ratings – EPS 98, RS 98

http://stockcharts.com/h-sc/ui?s=RIO&id=p96955353181&a=120022724&listNum=2

13–SIGM – Is the growth leader in the market for the video chips that are used in IP TV. SIGM has been a champ for the past year and broke out on monster earnings. SIGM has pulled back into the gap and is in the buying zone right now.

IBD ratings – EPS 74, RS 99

http://stockcharts.com/h-sc/ui?s=SIGM&id=p03864921589&a=91154776&listNum=2

14- SLT – This India and Australia mining and metals growth stock in the IBD 100. India is desperate for SLT’s metals. Buy on dips

IBD ratings - EPS 95, RS 98

http://stockcharts.com/h-sc/ui?s=SLT&id=p96955353181&a=118072642&listNum=2

15 – STP: They are owned by one of China’s richest men and are the low cost producer of solar. There earnings are accelerating and they just signed a major supply agreement. It broke out to high hell last week. I’d wait for a dip to buy

IBD ratings – EPS 99, RS 99

http://stockcharts.com/h-sc/ui?s=STP&id=p96955353181&a=119847226&listNum=2

16 – WFR – Wait for a dip to buy

IBD ratings - 97 94

http://stockcharts.com/h-sc/ui?s=WFR&p=D&yr=2&mn=0&dy=0&id=p35121347596&a=120581379&listNum=2

Bernanke Waffles Again

2007-12-11T16:22:00.000-05:00

Read it and weep. Bernanke zigs. Bernanke zags. The Greenspan put has been replaced with the Bernanke punt.

The Fed did not give the markets the clear assurances about the credit crunch that they wanted to hear. Prior to the Fed announcement I went into cash. After the announcement, the markets tumbled and I went short the indexes. Here is my nutshell view about how we got here:

1 - Paul Volker

In August 1979 a new sheriff came into town. His name was Paul Volker and he did not suffer fools. He was a no nonsense civil servant who wore off the rack baggy suits and smoked cheap cigars. He did not care about what anyone thought. He did whatever he had to do to kill the inflation of the late seventies. Volker did not pussyfoot around. The USA had to take the bitter medicine in the form of huge interest rate hikes. The country did the hard time and when the disease was purged the doctor got us back on our feet again by giving us a healthy dose of rate cuts and growing money supply. Thus began the great boom of the 1980s and the Reagan bull market.

2 - Alan Greenspan

New Fed chairman Alan Greenspan was just getting comfortable at his job when he was burned by the stock market crash of 1987. The shocking experience of the crash scared the daylights out of Greenspan. He vowed never to let something like that ever to happen again on his watch. As a consequence of that paranoia, Greenspan tried to abolish the business cycle.

To that end when the stock market was overheating in 1996, Greenspan tried to jawbone the markets with his famous "irrational exuberance" remarks rather than tighten money. He then let the overheated economy and stock market continue on its merry way without doing anything about it.

Finally, in fear that the much vaunted Y2K problem would cripple the economy, Greenspan poured gasoline on the stock market bubble by pumping an unprecedented amount of liquidity into the system from mid 1999 until January 2000. That caused the final great parabolic move of the 1990s stock market bubble. When the "Y2K problem" proved to not be a problem, Greenspan lurched the other way and tightened money. That caused the bubble to burst.

Now that the bubble had burst, Greenspan saw that the economy was heading towards a recession. His only way out was to concoct a scheme whereby the economy would be saved by the housing market. Thus, did Greenspan eventually start to prematurely cut rates in order to stimulate housing. Rather than let the economy go through the natural course of things, Greenspan figured that he could transfer one bubble into another. Hence, the housing bubble saved the day and forestalled the inevitable recession.

3 - Ben Bernanke

Ben Bernanke has inherited Greenpan's mess. The housing bubble has burst and the credit crunch is here. I somehow get the feeling that Bernanke knows that the chickens are finally coming home to roost, but he can not come to grips with it. Bernanke knows that The USA may finally have to go into a recession in order to work off the excesses of the housing bubble.

On the one hand, he does not want us to go off the deep into a recession that could result from the credit crunch. On the other hand, he does not want to give the economy too much stimulus that could stave off a recession at the cost of a weak dollar. So he waffles.

One week he seems to ignore the credit crunch, the next week he says the right thing. A week ago the markets were tanking in despair because they thought that Bernanke had abandoned them. Next the markets rallied when a Fed Governor said soothing words. Today the markets fell as they again felt abandoned by the Fed.

As a result of Bernanke's actions we have an unusual paradox. We have a Fed chairman who espouses a policy of being more transparent. To that end he is making the minutes of the meetings of the Federal Reserve more accessible to the public. Nonetheless, Mr. Bernanke's inscrutable behavior is making the Fed's policy less clear.

Outlook for the Week of 12/10/07

2007-12-08T17:17:00.000-05:00

The market probably has a free pass to run up into the Fed announcement. Then their will be fireworks as usual. It’s the same old story.

If Bernanke sounds like he is simpatico we will have our year end rally. My gut is that he has no choice but to be the candy man. In my view, the size of the cut is not as important as Bernanke's tone of voice.

Portfolio Stocks:

1 -ABB - ABB is a great growth story in the world wide construction boom. ABB. ABB is a long term buy and investors can scale in now. Traders might wait for a base to form with a later breakout. ABB could use a rest.

IBD ratings - EPS 99, RS 95

2 – AAPL -

AAPL made an alltime high last week. Buy now

IBD ratings – EPS 99, RS 99

3- BCSI - Had great earnings. I would wait to buy popping over $40

IBD ratings - EPS 97, RS 98

4- BIDU – The Chinese Google is in the early stages of phenomenal growth.

BIDU is popping a flag right now and should make a run to the all time highs.

IBD ratings – EPS 99, RS 99

5 -BOOM – BOOM blows things up to make specialty metals. This high tech company has shown steady growth over the past few years. It blasted to the moon last week. Buy on any weakness

IBD ratings – EPS 93, RS 97

6- CHINA - The Chinese market has pulled right back to the long term uptrend line
and is flashing major buy signals.

7 - CMG – CMG has saturated less than one half of the USA.

This is a great cookie cutter growth story that has several more years to go. CMG broke out last week. Buy it now
IBD ratings – EPS 95, RS 97

8 – FSLR – First Solar is the number one growth monster of the solar group.

Buy now
IBD ratings – EPS 80, RS 99

9– GME – The holiday sales season is upon us and GME stands to benefit. GME is growing like gangbusters and has a great long term chart . GME broke out to an all time high last week. Buy now with a tight stop.

IBD ratings – EPS 96, RS 97

9 – GOOG – Buy now with tight stop on run to highs or wait and buy breaking the all time highs.

IBD ratings – EPS 99, RS 91

10- ISRG – The Da Vinci robotic surgical system has taken the medical world by storm.

ISRG is still in the early stages of growth. ISRG chart is similar to CMG’s chart and the same TA parameters apply. Buy now
IBD ratings – EPS 99, RS 99

11- PBR – Popped to the top of its trading range and is undergoing a nice consolidation..

Wait for the base to develop.

12 - RIMM has been beaten up and needs to consolidate before resuming its upward run..

IBD ratings – EPS 99, RS 99

13 - RIO – RIO had a nice week and the chart is starting to look more constructive.

This is a long term growth and undervalued asset play.

IBD ratings – EPS 98, RS 98

14 –SIGM – Is the growth leader in the market for the video chips that are used in your flat screen TV. SIGM has been a champ for the past year and broke out on monster earnings. SIGM pulled back into the gap and then took off again. Buy on dips.
IBD ratings – EPS 74, RS 99

15 -SLT - What could be bad? An India and Australia mining and metals growth stock in the IBD 100 already. Buy & hold

IBD ratings - EPS 95, RS 98

16 – STP - They are owned by one of China’s richest men and are the low cost producer of solar. There earnings are accelerating and they just signed a major supply agreement. It broke out to high hell last week. I’d wait for a dip to buy

IBD ratings – EPS 99, RS 99

17– WFR – wait for a dip to buy

IBD ratings - 97 94

WEEKEND REVIEW

2006-04-22T13:51:00.000-04:00

PORTFOLIO UPDATE:

The strange ride continues as the major averages first fall down and then jump back up to marginal highs -see DJIA chart below. This time the stock markets savior was hope that the Fed would finally stop raising interest rates. The bullish minutes from the Fed's recent meeting had the effect of panicking the shorts during options expiration week.

The bull's mantra seems to be, damn the torpedoes, this market is going higher! More specifically the stock market seems to be saying the hell with record high oil and precious metal prices. The problem with this scenario is that we all know better, because in the long run these sky high prices can only lead to cost push inflation.

Furthermore, the stock market leadership remains locked in the following witches brew of not typical bull market groups: Energy, precious metal, infrastructure building, railroad, coal, selective tech & special situations like homeland security. Thus, I have positions in the following areas:

-Gold - KRY
-Oil & gas exploration - DO & RIG,
-Infrastructure power plant builders - ABB (Power Technology & automation)
-Homeland security - ASEI
-Bird Flu & Disease protection - EMFP
-Special growth Situations - GLW, GOOG, GS - see chart below, & NTRI
-Special situations - EWJ, SHLD

My point is that there are still many reasons to have a variant view of the market, but to fight the tape is futile. So once again I will go along with the tape until it changes direction. In short, I'm viewing things with a skeptical eye and don't intend to get caught up in all of the media's hoopla about new market highs. Therefore, I will continue to play the game with one hand on the exit door. In addition, I intend to take profits into any market rallies like I did last week.

MODEL PORTFOLIO:

ABB ABB 3.50%
ASEI Amer Sci & Eng 3.5%
DO Diamond Offshore 2.50%
EMFP Emer Filtration 4.45%
EWJ Japan ETF 4.40%
GLW Corning 4.0%
GOOG Google 4.0&
GS Goldman Sachs 4.45%
KRY Crystalex 5.0%
NTRI Nutrisystems 5.0%
PBR PetroBrazil 3.80%
RIG Transocean 3.5%
SHLD Sears Holdings 5.0%
UNH United Health 4.5&
CASH Interest Bearing Acct 47.40%

WEEKEND REVIEW

2006-04-10T02:41:00.000-04:00

PORTFOLIO UPDATE:

This is one strange market. All of the major averages have made marginal multi year highs, yet the percentage gains are relatively pathetic. Measures of market health such as market breadth, new highs, etc. are OK at best. The cyclical infrastructure building stocks, oil service stocks, and precious metal stocks are the new leaders.

As one can see by my past actions, my methodology always trumps my personal opinions. My methodology states that the stock market is always right. Therefore, no matter how logical my stock market predictions are, the tape always rules. I try not to argue with the trend of the market because the annals of history are littered with the remains of very smart people who disagreed with the opinion of the stock market.

On the other hand, I might be long the market but have one hand on the exit door ready to sell or go short. Famed hedge fund manger, George Soros takes this approach one step further. If he has a “variant perception” (i.e., an educated disagreement) with the trend of the market or conventional wisdom, he will not hesitate to make a huge “macro” bet against the trend, speculating that the market will turn. The Soros approach can make huge profits, but is extremely volatile.

I prefer my approach because it lets me sleep at night. Nevertheless, things are definitely “variant” from the norm today. For example, Interest rates keep rising and the price of gold is at a decades high. These are things that don’t typically happen at this stage of the stock market cycle. Maybe Soros would be going short right now. Me, I’ll try to stay aware of these potential stumbling blocks, but I'll also try to stay with the trend until it reverses.

MODEL PORTFOLIO:

AAPL Apple Computer 3.30%
ABB ABB 3.50%
ASEI Amer Sci & Eng 3.5%
CSCO Cisco 4.0%
DO Diamond Offshore 2.50%
EMFP Emer Filtration 4.45%
EWJ Japan ETF 4.40%
FFIV F5 Corp 4.75%
FWLT Foster Wheeler 4.50%
GLW Corning 4.0%
GS Goldman Sachs 4.45%
KRY Crystalex 5.0%
MSO Martha Stewart 4.50%
NWRE Neoware 3.5%
OVTI Omnivision 3.5%
RIG Transocean 3.5%
SHLD Sears Holdings 5.0%
UNH United Health 4.5%
CASH Interest Bearing Acct 27.15%

Managed Accounts Model Portfolio Wednesday Morning

2006-03-29T02:19:00.000-05:00

PORTFOLIO UPDATE:

The stock market welcomed new Fed Chairman Ben Bernanke with the Bronx cheer today as the Dow Jones Industrial Average fell 95 points. The entire decline occurred after 2:15 PM when the Federal Reserve Board raised interest rates for the 15th consecutive time.

As a consequence of the stock market’s overbought condition and the beginning of this sell off, I have been raising cash. Hence, I sold HANS & BA. Both stocks had great runs and to hold them was to tempt fate. I also pared back CSCO.

I did made a few small purchases the past few days. However, I have confined my buys to stocks that were beginning to make new moves such as OVTI & NWRE. I also jumped back into the oil patch today. Oil prices are still in a long term uptrend and are starting to rise again - see chart above. As a result the Oil service stocks are starting to perk up. DO made an all time high - see last chart above - and RIG was knocking on the door. Despite these purchases our cash position has risen to 38%.

MODEL PORTFOLIO:

ABB ABB 3.50%
ASEI Amer Sci & Eng 3.5%
BBY Best Buy 5%
CELG Celgene 3.6%
CSCO Cisco 4.0%
DO Diamond Offshore 2.50%
EMFP Emer Filtration 4.45%
FFIV F5 Corp 4.75%
GLW Corning 4.0%
GS Goldman Sachs 4.45%
NWRE Neoware 3.5%
OVTI Omnivision 3.5%
RIG Transocean 3.5%
SHLD Sears Holdings 5.0%
UNH United Health 4.5%
YMI YMI Bioscience 2.25%
CASH Interest Bearing Acct 38.0%

Managed Accounts Model Portfolio Weekend Review

2006-03-25T15:07:00.000-05:00

PORTFOLIO UPDATE:

It is still a tale of two markets. It is still the best of times for the old large cap stocks like railroads, steel manufacturers & construction companies. It is still the worst of times for the former NASDAQ technology leaders like Apple, Broadcom, Google & Yahoo.

It’s interesting that all of the aforementioned NASDAQ stocks are lagging even though their businesses are booming. Obviously the market thinks that they have run too far & too fast and therefore need to take a breather in order to digest their gains. Oh well, as they say you have to stay in style in order to make your pile.

As one can see when comparing the charts of the NYSE & NASDAQ advance decline lines, the divergence between the NYSE & the NASDAQ stocks since the 2000- 2002 bear market is nothing new. What is new is the recent divergence between the NYSE leaders and the NASDAQ leaders.

The stock market's behavior the past three years is similar to the stock market's behavior after past crashes such as post 1929. In many instances markets followed crashes with an “echo bubble.” Thus, the 1920’s bubble was followed by a crash, an echo stock market bubble, and then another severe bear market. I’m not saying that this has to happen. The world's economies are more interrelated now and the world’s economic leaders are much more sophisticated now. Nonetheless, any type of market behavior that has repeated throughout history is something to be aware of.

Right now, the markets are overbought and due for a rest. I have therefore pared down our longs and put on a small QQQQ short hedge. If this market does fall apart I want to be protected and if the market consolidates and then rallies I want to be able to deploy cash in new positions.

MODEL PORTFOLIO:

ASEI Amer Sci & Eng 3.5%
BA Boeing 5.25%
BBY Best Buy 5%
CELG Celgene 3.6%
CSCO Cisco 6.0%
EMFP Emer Filtration 2.20%
FFIV F5 Corp 4.75%
GLW Corning 4.0%
GOOG Google 3.5%
GS Goldman Sachs 4.45%
HANS Hansen’s Natural 5.0%
OVTI Omnivision 3.5%
SHLD Sears Holdings 5.0%
UNH United Health 4.5%
YMI YMI Bioscience 2.25%
CASH Interest Bearing Acct 33.25%

Managed Accounts Model Portfolio Wednesday Evening

2006-03-15T21:42:00.000-05:00

PORTFOLIO UPDATE:

The stock market rally followed through today with the S&P 500 index making a new high for the year. I don't want to argue with the tape and will play this rally as opportunities arise. Nevertheless, As President Reagan said to Russian President Michael Gorbachev, "trust but verify."

When it comes to the stock market one way of verifying is to look for divergences. As Helene Meisler of Real Money points out, right now there are glaring divergences between the S&P 500 which has made a new high and the advance/decline line which has failed to do so.

Another divergence can be found when comparing the number of stocks making new highs - which has diminished - with the S&P 500. Combine these indicators with the lagging NASDAQ Indices and we have some cause for concern. Although nothing says that these issues cannot right themselves, we must be aware of these chinks in the markets armor or we will not be able to protect ourselves when the time comes.

The star of the market today was Sears Holdings (SHLD) which I purchased before the opening at $124.70. SHLD reported blowout earnings on declining sales this morning. Ordinarily, declining sales would be cause for concern, but Eddie Lampert has a plan to cut the fat by reducing sales of unprofitable items. He also wants to increase shareholder value by selling real estate. With quarterly earnings of $4 per share, SHLD is on pace to earn $16 per share for the year. If we assign SHLD a puny Multiple of only 10 times earnings SHLD would be valued at $160 per share. In any event the market finally took to a liking to SHLD today as it broke out to a new 2006 high.

MODEL PORTFOLIO:

AAPL Apple Computer 3.40%
AEOS American Eagle 4.25%
ASEI Amer Sci & Eng 3.5%
BA Boeing 5.25%
BBY Best Buy 5%
BRCM Broadcom 4.6%
CELG Celgene 3.6%
CMG Chipotle Grill 3.25%
COH Coach 3.65%
CSCO Cisco 6.0%
EMFP Emer Filtration 2.20%
FFIV F5 Corp 4.75%
GLW Corning 4.0%
GS Goldman Sachs 4.45%
HANS Hansens Natural 5.0%
MSFT Microsoft 4.10%
SHLD Sears Holdings 5.0%
UNH United Health 4.5%
YMI YMI Bioscience 2.25%
CASH Interest Bearing Acct 21.25%

Managed Accounts Model Portfolio Tuesday Evening

2006-03-14T22:01:00.000-05:00

PORTFOLIO UPDATE:

Options expiration week has arrived, the bond market staged a rally and Goldman Sachs issued a phenomenal earnings report. All of this was enough to spark an oversold market into a broad based rally. It looks like the green light is on at least for this week.

Today, I jumped aboard the Goldman Express before the market opened. I also purchased Chipotle Grill which had fantastic earnings. Both stocks had stellar days. GS gained 8.7 points and CMG was up 5.29 points.

Another standout was ASEI, which tacked on 5.7 points while making another all time high. American Science & Engineering’s bomb detection systems are now the world standard bearer. If you want to board Air Force One or enter the White House, you are going to pass through one of ASEI’s scanners. Other portfolio stocks making new highs were EMFP & YMI.

In short, the bulls won the game today and the Dow Jones Industrial Average made a new high for the year. The NASDAQ finally rallied but will have a lot of catching up to do before the bulls can declare victory.

MODEL PORTFOLIO:

AAPL Apple Computer 3.40%
AEOS American Eagle 4.25%
ASEI American Sci & Eng 3.5%
ASPV Aspreva Pharm 2.80%
BA Boeing 5.25%
BBY Best Buy 5%
BRCM Broadcom 4.6%
CELG Celgene 3.6%
CEPH Cephalon 2.75
CMG Chipotle Grill 3.25%
COH Coach 3.65%
CSCO Cisco 6.0%
EMFP Emer Filtration 2.20%
FFIV F5 Corp 4.75%
GLW Corning 4.0%
GS Goldman Sachs 4.45%
HANS Hansen’s Natural 5.0%
MSFT Microsoft 4.10%
UNH United Health 4.5%
YMI YMI Bioscience 2.25%
CASH Interest Bearing Acct 20.70%

Model Portfolio Weekend Review

2006-03-13T07:42:00.000-05:00

Johnny Carson AKA Karnak the Magnificent: “the answer is Psychosis, megaphone and divergence.” Ed McMahon: “And the answer is…” I’m sure that Karnak would come up with a great punch line, but those three words describe the problems of the current stock market quite aptly.

If one examines the chart of the Dow Jones Industrial Averages - above, it can be seen that the up and down swings have become more and more violent and have taken the form of a megaphone on the chart. Historically this has been a sign of a deeply confused psychotic market if you will. How this behavior pattern will resolve itself is unknown, but clearly the many concerns that nag us from day to day are having an affect on the tape.

We are faced with the problems of Iraq, Iran, rising interest rates and inverted yield curves. We are also divided as a country over the Bush Administration’s handling of the war on terror, the Dubai Ports deal, Hurricane Katrina our borders, etc. The Democrat’s response to these issues leaves us even more insecure. Is it any wonder that the stock market is confused?

Furthermore, many of the broad based stock market indexes such as the NASDAQ 100 are lagging the performance of the narrowly measured 30 stock Dow Jones Industrial Average. Indeed the troops appear to be abandoning the Generals. This divergence is apparent when one compares the chart of the Dow Jones Industrial Average with the chart of the NASDAQ 100.

I do not have an answer as to whether the market will top out at this time. I don’t know if the possible “head & shoulders reversal pattern” of the NASDAQ 100 will come to fruition. All I know is that there are many things to be concerned about and that we are going through a difficult period where capital is seeking safety in large cap stocks such as Colegate. This is all the more reason to trade quickly and to be cautious until this market phase is resolved.

MODEL PORTFOLIO:

AEOS American Eagle 4.25%
ASEI American Sci & Eng 3.5%
BA Boeing 5.25%
BBY Best Buy 5%
BRCM Broadcom 4.6%
CELG Celgene 3.6%
CEPH Cephalon 2.75
COH Coach 3.65%
CSCO Cisco 6.0%
EMFP Emer Filtration 3.60%
FFIV F5 Corp 3.0%
GLW Corning 4.0%
HANS Hansen’s Natural 5.0%
MSFT Microsoft 4.10%
NDAQ NASDAQ 4.30%
NUE Nucor 4.75%
UNH United Health 4.5%
YMI YMI Bioscience 2.25%
CASH Interest Bearing Acct 25.90%

Managed Accounts Model Portfolio Monday Morning

2006-03-06T08:30:00.000-05:00

PORTFOLIO UPDATE:

They say that if you want to make your pile you have to stay in style. While nothing in life is guaranteed, if one can be invested in successful companies that are involved in the major economic trends of the day, one’s odds for success will be greatly improved. With this in mind I’ve positioned our portfolios in some of the following areas.

One of the keys to our performance has been the continued buildup of the internet. The reemergence of Cisco as a market leader bodes well for this area. Cisco wants to be the internet portal to your home and hopes to do so through your set top cable TV box. Its purchase of Scientific Atlanta will enable CSCO to ad Ethernet connection and wireless internet broadband routing to an all in one box. Other beneficiaries of this trend are F-5 Networks and Broadcom which makes the computer chips for these products.

Our portfolios have also benefited from the booms in biotechnology and nanotechnology where real drugs and products are reaching the market place. In biotechnology we have had success with Celgene, Cephalon, and YMI biosciences.
In nanotechnology, the spread of bird flu has helped to boost the share price of Emergency filtration Products.

One final area that I’d like to mention our involvement in is the war on terror.
American Science and Engineering makes bomb detection equipment that is becoming widely accepted as the world standards. Ceradyne makes ceramic body armor. Both companies are experiencing extraordinary demand for their products.

MODEL PORTFOLIO:

AAUK Anglo American 3.5%
AEOS American Eagle 4.25%
ASEI American Sci & Eng 3.5%
ATI Allegheny Tech 3.30%
BA Boeing 5.25%
BBY Best Buy 5%
BRCM Broadcom 4.6%
CELG Celgene 3.6%
CEPH Cephalon 2.75
CRDN Ceradyne 3.0%
CSCO Cisco 6.0%
EMFP Emer Filtration 3.60%
FFIV F5 Corp 6.0%
GLW Corning 4.0%
GS Goldman Sachs 3.60%
IFN India Fund 2.50%
MSFT Microsoft 4.10%
UNH United Health 4.5%
YMI YMI Bioscience 2.25%
CASH Interest Bearing Acct 24.70%

Managed Accounts Model Portfolio Tuesday Morning

2006-02-28T03:14:00.000-05:00

PORTFOLIO UPDATE:

The stock market rally continued yesterday as energy prices fell and housing starts had a poor showing. This perceived economic weakness is giving the market the excuse to rally in the belief that the Federal Reserve is almost done raising interest rates.

As I said in my last report, I’m going to trade briskly and not fight the tape. I therefore sold VNO which was acting poorly and I purchased five stocks that started to perk up:

-Microsoft owns the next generation game technology with its X-Box as Sony has backed off the playing field with its competitive product. MSFT is introducing its new Vista Operating System this year and finally has the wind at its back.
-Alkermes with its partner Cephalon is close to getting FDA approval to market its revolutionary alcohol treatment drug..
-India fund is a way to play the dynamic growth of India’s emerging economy.
-Aqua America is the premier utility that provides various water services in the USA.
-Qualcom is a virtual annuity collecting royalties on its CDMA cell phone technology

Our portfolios are now back in gear and I am watching the financial stocks with great interest. They have been the markets poorest performers and if they can start a significant rally that will be a great sign for the stock market.

MODEL PORTFOLIO:

AAUK Anglo American 3.5%
AAPL Apple Computer 5.0%
ALKS Alkermes 2.65%
AMD Advanced Micro 4.0%
ASEI American Sci & Eng 3.5%
BA Boeing 5.25%
BBY Best Buy 5%
BRCM Broadcom 4.6%
CELG Celgene 3.6%
CEPH Cephalon 2.75
CRDN Ceradyne 3.0%
EWJ Japan ETF 3.40%
FFIV F5 Corp 3.0%
GOOG Google 4.0%
IFN India Fund 2.50%
IVAC Intevac 4.20%
MSFT Microsoft 4.10%
QCOM Qualcom 4.75%
UNH United Health 4.5%
WTR Aqua America 4.45%
YMI YMI Bioscience 2.25%
CASH Interest Bearing Acct 20.45%

Managed Accounts Model Portfolio Thursday Evening

2006-02-23T20:39:00.000-05:00

PORTFOLIO UPDATE:

Former Fed Chairman Alan Greenspan's legacy is that he kept inflation under control and to a great extent helped to avoid the historic boom and bust economy typical of the business cycle. The problem with this type of policy is that when the economy finally gets bad a lot of pent up damage can occur, such as the recession caused by the stock market crash of 2000 to 2002. Nevertheless, things could have been a lot worse. Instead, Greenspan's interest rate policy helped to mitigate the economic decline and steer the economy into a housing boom.

Another consequence of the the Greenspan economy is that indicators that had historically foreshadowed recession have not worked the same way during past 20 years. Today we are at economic crossroads because interest rates have risen gradually for months on end and the housing boom has come to an end.
Despite this and the fact that we now have an inverted yield curve, the economy keeps on growing and the stock market keeps on inching up. Historically, an inverted yield curve has helped to cause many recessions and has therefore been a reliable economic forecasting tool. A recent example is when the U.S. Treasury yield curve inverted in 2000 just before the U.S. equity markets collapsed - see chart below.

This all leads me to hypothesize that the world might have changed and to utter the dangerous words "this time its different." For just when the wolf appears to be at the door, our new Fed Chairman Ben Bernanke looks like he might save the day and stop raising interest rates. All of which is to say that the Fed is playing a game of chicken with the economy and the stock market has so far held up in the hope that the Fed will untie the noose around our necks before its too late.

That leaves us to play the market rallies at a brisk trading pace. I'm going to continue to take quick profits and trade around our positions as long as this economic phase lasts. As is typical of mature, topping bull markets, the Dow Jones Average has made token highs while the rest of the market has lagged. Thus, many of the markets real leaders like Apple and Google are nowhere near their highs. Old leaders like Citicorp, Intel, Microsoft, Dell and General Electric are down in the dumps. Instead the market has leaders like Caterpillar (CAT). If any of you readers believe that CAT and other rust belt stocks will lead us all by themselves to the Promised Land, you are mistaken. Until this rally becomes broad based and lots more stocks make highs, I will play the game with one hand on the exit door. One recent purchase was Celgene (CELG) - above. In sum, this time might indeed be different, but Fed chairman Bernanke has the burden of proof.

MODEL PORTFOLIO:

AAUK Anglo American 3.5%
AAPL Apple Computer 5.0%
AMD Advanced Micro 4.0%
ASEI Amer Sci & Eng 3.5%
BA Boeing 5.25%
BBY Best Buy 5%
BRCM Broadcom 4.6%
CELG Celgene 3.6%
CEPH Cephalon 2.75
CRDN Ceradyne 3.0%
EWJ Japan ETF 3.40%
FFIV F5 Corp 3.0%
GOOG Google 4.0%
IVAC Intevac 4.20%
UNH United Health 4.5%
VNO Vornado Realty 2.25%
YMI YMI Bioscience 2.25%
CASH Interest Bearing Acct 36.65%

Managed Accounts Model Portfolio Thursday Evening

2006-02-16T21:58:00.000-05:00

PORTFOLIO UPDATE:

Everybody back in the pool! It seems that for the time being the stealth sell off has ended and we are now back in business with 82.20% of our assets long stocks. The Dow Jones Industrial Average of 30 stocks has taken out the years high and the rest of the market is now playing catch up. The large institutional fund mangers have done a great job of hiding their money in the Dow stocks while selling out of their positions in many of the market’s prior leaders. This type of event happens once every year or so, and if anyone has a formula to figure out when, please don’t hesitate to call me.

Since I last wrote, I have covered our QQQQ short hedge and sold a few stocks. I have also made many purchases:

- Apple Computer (AAPL) may have finally bottomed and business is still booming.
- Anglo American Gold (AAUK) has had a nice correction and is a way to play the rally in gold & diamonds
- Advanced Micro Devices (AMD) is eating Intel’s lunch with their computer chips
- Alliant Technology (ATI) finally pulled back into the buying zone.
- Best BUY (BBY) had another great quarter of earnings and broke to a new high.
- Cephalon (CEPH) is one of the world’s premier biotech growth companies and just gave stellar guidance for 2006.
- F-5 (FFIV) is growing like gangbusters building the internet & telecom infrastructure.
- Google (GOOG) has been trashed by the media including an almost libelous Barron’s hack job last weekend. GOOG appears to have put in a bottom today and is still the world’s greatest growth company. All of the allegations about click fraud and competition from Microsoft are baloney. These stories are 2 years old and GOOG is still kicking ass.
- Hansen’s Natural (HANS) is still the fastest growing beverage company in the world and appears to have finally finished its correction.
- Micron Tech (MU) is finally in the driver’s seat riding the crest of the DRAM memory chip cycle.
- Petro Basiliero (PBR) is Brazil’s greatest oil company and is on a growth tear. They are the only company capable of building & running the proposed South American pipeline.
- Rackable Systems (RACK) makes power efficient computers & systems for internet service suppliers such as Yahoo & Google.

I made a few other purchases, but the important point is that the market likes the new Fed Chairman, Ben Bernanke. Its options expiration time and many money mangers want to jump back in to the market before it runs away from them. Nevertheless, the market will most likely cool off tomorrow as the weekend approaches.

MODEL PORTFOLIO:

AAUK Anglo American 3.5%
AAPL Apple Computer 5.0%
ABB ABB Corp 3.25%
AMD Advanced Micro 4.0%
ASEI Amer Sci & Eng 3.5%
ATI Allegheny Tech 2%
BA Boeing 5.25%
BBY Best Buy 5%
CEPH Cephalon 2.75%
CRDN Ceradyne 3.0%
EWJ Japan ETF 3.40%
FFIV F5 Corp 3.0%
GOOG Google 4.0%
IVAC Intevac 4.20%
MU Micron Technologies 5.0%
PBR Petro Brasileiro 3.50%
PTRY Pantry 2.60%
RACK Rackable Systems 3.75%
STMP Stamps.com 3.5%
TLAB Tellabs 4.0%
UNH United Health 4.5%
YMI YMI Bioscience 4.5%
CASH Interest Bearing Acct 17.80%

2006-02-11T17:51:00.000-05:00

PORTFOLIO UPDATE:

Last week was the worst week that I have experienced since I began managing private accounts. Our portfolios are now down around 1% for the New Year having been beaten up by a confluence of events that have transformed statistically normal corrections into massacres. The only antidote for this type of market activity is to trim our sails until this market storm is over. That means more cash, less trading and building our house brick by brick as opportunities arise.

As is typical of nasty market corrections, the Dow Jones Industrial Average has not yet been hurt and is masking the damage that has been inflicted upon the rest of the market.Here are some examples of market leaders that have made abnormal downside moves. I’ll start with ISRG, which luckily crashed after we sold the position. Intuitive Surgical’s only sin was to have fabulous earnings growth but to rightfully temper their growth guidance for next year.

The smartest investor relations people on Wall Street know how to play the earnings guidance game so that they keep on beating analyst’s expectations. Microsoft was the first company to play this game during the 1990s. At the time Microsoft would habitually lower analyst’s expectations only to see its stock tank and then come back after later beating the expectations. Eventually Wall Street caught on to Microsoft’s game and the stock would not sell off anymore. I submit that many great companies are now being punished for playing Bill Gate’s old game.
Eventually, Wall Street will catch on, but for now money managers are dumping stocks first and asking questions later. Another example of this phenomenon is NTRI which is growing its business hand over fist.

Another ugly sell off is occurring in the energy sector. For whatever reason, some large institutional investors have been dumping these stocks. Clearly there is a long term global energy crises, but that does not matter when the big boys start to sell. My problem is that I give my stocks some leeway before I sell them. For example, UPL is the fastest growing oil & gas exploration company in the world. The stock broke out to a new high and continued to rally. It then had a healthy pullback but finally broke down below support on the chart. My methodology says to hold on a normal pullback but to sell on a breakdown. I followed my rules and we ended up losing most of our gains in UPL. The market is just going through a miserable phase where nothing is working and no stock is immune.

Last week I bought and sold many stocks that reported great earnings and then broke out to new highs only to spike and reverse back down. One example was ASEI, which reported a 400% increase in earnings and, as per a New York Times front page lead article last week,. stands to benefit from huge defense spending on its bomb detection equipment. Unfortunately, in the present market environment that news was not good enough

Fortunately, some of our longs did well. For instance, YMI Biosciences jumped over 20% based on some very good news coming out of Phase III drug tests. TLAB & MU are other examples of stocks that are in favor.

MODEL PORTFOLIO:

AAUK Anglo American 3.5%
BA Boeing 5.25%
BBY Best Buy 5%
BRCM Broadcom 5.0%
CRDN Ceradyne 3.0%
GOOG Google 2.0%
IVAC Intevac 3.75
MU Micron Technologies 5.0%
SBUX Starbucks 5.0%
SNE Sony 2.5%
STMP Stamps.com 3.5%
TLAB Tellabs 4.0%
UNH United Health 4.5%
YMI YMI Bioscince 3.5%
CASH Interest Bearing Acct 44.75%
QQQQ Short Hedge 30.75%

2006-02-07T20:46:00.000-05:00

PORTFOLIO UPDATE:

The bloodletting and housecleaning continued today as the stock market suffered another broad based decline. This time the energy and metal stocks were wrecked by the decline.
As a consequence our portfolios were hit again and I took further defensive action. We are now 46.45% long stocks, 49.55% in cash, and 30.75% short QQQQ. That takes us to 19.7% net long.

The media’s story line is that the energy & metal stock bubbles are now broken. My take is that these stocks are having a short term correction within a long term bull market. Does anyone really believe that a few weeks of warm winter have ended the world’s energy crises? Does anyone really believe that some nasty profit taking in metal stocks is because China will no longer have any demand for metals?

My reaction is to play defense and go with the flow for now with the idea of repurchasing these stocks later on. I therefore sold AAPL yesterday and CHK, CUP, MON, QSII, RIG, SWN, & TIE today. All of these are great long term investments but short term risks. I also purchased ARP & MU which both broke out to new highs.

MODEL PORTFOLIO:

ARP Amer Reprographics 4.0%
BA Boeing 5.25%
BRCM Broadcom 5.0%
CRDN Ceradyne 3.0%
ESRX Express Scripts 4.5%
GOOG Google 2.0%
MU Micron Technologies 4.0%
PETS Petmed Express 3.5%
SBUX Starbucks 5.0%
SNE Sony 2.5%
TLAB Tellabs 3.75%
UNH United Health 4.5%
UPL Ultra Petroleum 3.5%
CASH Interest Bearing Acct 49.55%
QQQQ Short Hedge 30.75%

Weekend Review

2006-02-05T19:36:00.000-05:00

PORTFOLIO UPDATE:

The market had another vicious sell off Friday, but our portfolios all had small gains thanks to the defensive measures that I took. We are now 58% long stocks, 42% in cash and 30.75% short the QQQQ as a hedge against our longs. This adds up to 27.5% net long.

Until this market shows some signs of stability, I intend to keep a defensive posture. The Achilles’ heal of my methodology is a whipsaw market such as we have just experienced. Since the year began the market has had a nice rally followed by a sell off, followed by a rally and then another sell off. In short, the stock market has had a round trip to nowhere.

I don’t believe that we are in a bear market but I do believe that we are in some sort of reassessment phase. It is frustrating to give up some of our nice gains, but it would be much more frustrating to lose money. Therefore, the best thing to do is to bite the bullet and regroup until the coast is clear.

I will trade around the QQQQ short hedge and pick my shots as opportunities appear. On Friday I sold FDX which broke support on the chart. I like the company, but there is no use fighting the market which is punishing Federal Express over high energy costs. I also added to our QQQQ short in the morning as further protection for our capital. Finally, I purchased CUP which broke out to a new high.

MODEL PORTFOLIO:

AAPL Apple Computer 3.5%
BA Boeing 5.25%
CHK Chesapeake Energy 2.5%
CRDN Ceradyne 3.0%
CUP Peru Copper 3.5%
ESRX Express Scripts 4.5%
GOOG Google 2.0%
MON Monsanto 4.0%
PETS Petmed Express 3.5%
SBUX Starbucks 5.0%
SNE Sony 2.5%
SWN Southwestern Energy 3.5%
TIE Titanium Metals 3.75%
TLAB Tellabs 3.75%
UNH United Health 4.5%
UPL Ultra Petroleum 3.5%
CASH Interest Bearing Acct 42.0%
QQQQ Short Hedge 30.75%

Managed Accounts Model Portfolio Thursday Evening

2006-02-02T21:51:00.000-05:00

PORTFOLIO UPDATE:

Today was as ugly as sin as stocks sold off across the board and many market leaders were taken out and shot. Our portfolios were not immune and all took nasty hits. The market is now going through a vicious phase where valuations are being negatively reassessed. Many growth stocks have now posted great earnings reports only to be massacred because the earnings did not meet analyst’s expectations.

The first example of this phenomenon was the Google sell off. The next example occurred this morning when NTRI got hit for 8 points after reporting great earnings and lowering analyst’s expectations. I was not going to let this happen to us again, so I sold ISRG while it was up during the day. After the close, ISRG reported great earnings and fell over 12 points.

With so many stocks getting damaged, I had to play defense and sold many other positions such as BEN, CMED & QSII. Furthermore, I reduced our positions in CHK & UPL. Lastly, I got hoodwinked into buying and selling REDF for a loss because of a false earnings report. I bought REDF after earnings were reported at an amazing $1.23 for the quarter. Twenty minutes later another press release changed the earnings to only 1.23 cents. Thank you for flying Lufthansa!

Lastly, I made two purchases today. I bought Starbucks (SBUX), which broke out to a new high after reporting fantastic earnings. I also nibbled on GOOG, which appears to have weathered the storm over its recent earnings report.

In sum, we are now up to 41.75% cash with a 20.5% QQQQ short hedge. I will make further cuts if required. This too shall pass, especially when Wall Street realizes that things are OK with growth stocks like NTRI & ISRG. These companies are just trying to lower analysyts unreasonable expectations.

MODEL PORTFOLIO:

AAPL Apple Computer 3.5%
BA Boeing 5.25%
CHK Chesapeake Energy 2.5%
CRDN Ceradyne 3.0%
ESRX Express Scripts 4.5%
FDX Fedex 3.75%
GOOG Google 2.0%
MON Monsanto 4.0%
PETS Petmed Express 3.5%
SBUX Starbucks 5.0%
SNE Sony 2.5%
SWN Southwestern Energy 3.5%
TIE Titanium Metals 3.75%
TLAB Tellabs 3.75%
UNH United Health 4.5%
UPL Ultra Petroleum 3.5%
CASH Interest Bearing Acct 41.75%
QQQQ Short Hedge 20.50%

Managed Accounts Model Portfolio Tuesday Evening

2006-01-31T23:34:00.000-05:00

PORTFOLIO UPDATE:

Today a confluence of events occurred that could make any money manager want to hide. In Alan Greenspan’s last act, the Federal Reserve Board raised interest rates by .25% and Ben Bernanke, the new Fed Chairman, was sworn in. After the close, Google hit its first bump in the road by missing analyst’s earnings estimates, allegedly due to a one time event of having to pay higher tax rates. That sent stock index futures and Google’s share price into a downward spiral. This evening the President gave his State of The Union Address in which he made a number of proposals that will have an impact on a multitude of industries ranging from healthcare to energy. Tomorrow the stock market will sort this all out.

Needless to say, I’m happy that we only have a tiny 3.5% position in GOOG which was once as high as 9% of our portfolios. I am also glad that out QQQQ short hedge will mitigate any losses caused by Google’s sell off. I also believe that the Google story is far from over. After this hiccup is done, I am certain that GOOG will right itself back up and be ready for another bull run.

In other portfolio matters I sold HANS, MO & NDAQ which were starting to act poorly for various reasons. In addition, I added to CHK when it broke out to a new high and I purchased MON. Monsanto is the world’s greatest provider of agricultural products and genetically engineered seeds.

MODEL PORTFOLIO:

AAPL Apple Computer 3.5%
BA Boeing 5.25%
BEN Franklin Resources 5.0%
CHK Chesapeake Energy 5.0%
CMED China Med Tech 2.25%
CRDN Ceradyne 3.0%
ESRX Express Scripts 4.6%
FDX Fedex 3.75%
GOOG Google 3.5%
ISRG Intuitive Surgical 4.0%
MON Monsanto 4.0%
MSFT Microsoft 5.5%
NTRI Nutrisystem 4.5
PETS Petmed Express 3.5%
SNE Sony 2.5%
SWN Southwestern Energy 3.5%
TIE Titanium Metals 3.75%
TLAB Tellabs 3.75%
UNH United Health 4.5%
UPL Ultra Petroleum 5.0%
CASH Interest Bearing Acct 16.15%
QQQQ Short Hedge 20.50%

Managed Accounts Model Portfolio Weekend Review

2006-01-28T16:03:00.000-05:00

PORTFOLIO UPDATE:

Opinion may vary, but the tape never lies. Despite the stock market wipeout that occurred one week ago, the stock market rallied every day since then and acted as if the big bloodbath never happened. This sharp rebound surprised me, but has not hurt us because I learned a long time ago to not fight the tape.

No matter what one’s opinion is, the market is always right. When stocks start to act well one had better jump on board or the ship will leave the dock without him. Last week, many stock market leaders broke out to new 2006 highs. I therefore purchased Express Scripts (ESRX) -above right -, Microsoft (MSFT), Nutrisystem (NUTR)- below right-, and Titanium Metals (TIE) on Friday.

Keeping with discipline, I also took some profits. I sold BRCM and MRVL after they gapped up way above our Thursday purchase price. I also sold ACH and X after they made big one week moves. Maybe these stocks will go higher, but I have to ring the cash register when we can lock in quick big gains. There are plenty of great stocks out there and no one ever got hurt taking a profit.

MODEL PORTFOLIO:

AAPL Apple Computer 3.5%
AIRM Air Methods 2.75%
BA Boeing 5.25%
BEN Franklin Resources 5.0%
CHK Chesapeake Energy 3.0%
CMED China Med Tech 2.0%
CRDN Ceradyne 3.0%
ESRX Express Scripts 4.6%
FDX Fedex 3.75%
GOOG Google 3.5%
HANS Hansen’s Natural 3.25%
ISRG Intuitive Surgical 4.5%
MO Altria 3.5%
MSFT Microsoft 5.5%
NDAQ NASDAQ Stock Market 4.0%
NTRI Nutrisystem 4.6
PETS Petmed Express 3.5%
SNE Sony 2.5%
SWN Southwestern Energy 3.5%
TIE Titanium Metals 3.75%
TLAB Tellabs 3.75%
UNH United Health 4.5%
UPL Ultra Petroleum 5.0%
CASH Interest Bearing Acct 11.80%
QQQQ Short Hedge 20.5%

Managed Accounts Model Portfolio Thursday Evening

2006-01-26T21:10:00.000-05:00

PORTFOLIO UPDATE:

Hold it – before you look at how well the market did today and how bad you think your account performed – think again! Our friends at Charles Schwab have accounting issues and we had a fine day today. The folks at Schwab post any after hours buys as a loss to the extent that your purchase price was above the closing price. Thus, if we paid $65 after hours for a stock that closed at $60, we appear to have a $5 loss until the next day when Schwab adjusts their books. This is true even if the stock trades up to $70 after hours.

After the market closed today Broadcom (BRCM) announced monster earnings growth for the past quarter. I had to wait until 4:15 PM to purchase BRCM and therefore missed 5 points of the gain, because Schwab stops all of their trading systems between 4:00 PM and 4:15PM. Despite that handicap, we paid $64 for our BRCM shares, which were trading over $72 at 7:00 PM. I also purchased Marvel Tech (MRVL) after the close, because MRVL is a proxy for BRCM. BRCM & MRVL are the Gretzky & Messier of the wireless internet revolution.

Since my last posting, I made several purchases and sales. Yesterday I made some sales in order to cut down on portfolio risk. We lucked out when I sold SNDK around $72.60 because SNDK crashed below $60 after today’s close. Sandisk had a downside reversal yesterday and I wanted to lock in our trade before tonight’s earnings report was released. I also sold ACR & NTRI and trimmed our positions in CMED & HANS.

Today the market continued to rally as if last Friday’s decline never happened. There is no use fighting the tape, so I covered ½ of our QQQQ short hedge midday when the "QQQQs" fell back to unchanged. I also bought Sony (SNE)and Tellabs (TLAB) which both broke out on huge earnings gains. Finally, I added to our NDAQ position & repurchased BEN. Both stocks had big upside breakouts today.

MODEL PORTFOLIO:

AAPL Apple Computer 3.5%
ACH Alum Corp China 3.5%
AIRM Air Methods 2.75%
BA Boeing 5.25%
BEN Franklin Resources 5.0%
BRCM Broadcom 4.3%
CHK Chesapeake Energy 3.0%
CMED China Med Tech 3.75%
CRDN Ceradyne 3.0%
FDX Fedex 3.75%
GOOG Google 3.5%
HANS Hansen’s Natural 3.25%
ISRG Intuitive Surgical 4.5%
MO Altria 3.5%
MRVL Marvel Tech 3.5%
NDAQ NASDAQ Stock Market 2.0%
PETS Petmed Express 3.5%
SNE Sony 2.5%
SWN Southwestern Energy 3.5%
TLAB Tellabs 3.75%
UNH United Health 4.5%
UPL Ultra Petroleum 5.0%
X US Steel 3.5%
CASH Interest Bearing Acct 15.45%
QQQQ Short Hedge 20.5%

Managed Accounts Model Portfolio Tueaday Evening

2006-01-24T23:16:00.000-05:00

PORTFOLIO UPDATE:

After last Friday’s drubbing, the stock market has bounced for two days. I’m not sure if the major averages have bottomed yet, but many small to mid cap stocks have been flying. In addition some individual stocks might have bottomed already. Lastly, some new groups have come into play.

With the above in mind, I repurchased AAPL and traded around GOOG and SNDK. All three stocks might have bottomed. I also purchased Petmed Express (PETS), a rapidly growing mid cap stock which reported great earnings and broke out to a new high on Monday. Steel stocks are on fire so I purchased US Steel (X) in order to get some exposure in the group.

In sum, the stock market suffered some type of seizure last week. I would be very surprised to see the patient jump right out of a hospital bed without a few more stumbles. I therefore intend to take quick profits and trade around our positions. I also intend to keep our QQQQ short hedge on until the coast is clear.

MODEL PORTFOLIO:

AAPL Apple Computer 3.5%
ACH Alum Corp China 3.5%
AIRM Air Methods 2.75%
BA Boeing 5.25%
CHK Chesapeake Energy 3.0%
CMED China Med Tech 3.75%
CRDN Ceradyne 3.0%
FDX Fedex 3.75%
GOOG Google 3.5%
HANS Hansen’s Natural 4.5%
ISRG Intuitive Surgical 4.5%
MO Altria 3.5%
NDAQ NASDAQ Stock Market 2.0%
NTRI Nutrisystems 3.5%
PETS Petmed Express 3.5%
SNDK Sandisk 3.5%
SWN Southwestern Energy 3.5%
UNH United Health 4.5%
UPL Ultra Petroleum 5.0%
X US Steel 3.5%
CASH Interest Bearing Acct 26.5%
QQQQ Short Hedge 41.0%

Managed Accounts Model Portfolio Weekend Review

2006-01-21T12:12:00.000-05:00

PORTFOLIO UPDATE:

The stock market was taken to the woodshed yesterday and was given a good old fashioned beating. The Down Jones Industrial Average suffered its worst decline in almost three years and is now negative for the year.
The reasons for the sell off were the crises with Iran; soaring oil prices; poor earnings reports from Intel, General Electric, Citicorp and Yahoo; the confrontation between the Justice Department and Google over child pornography; and options expiration.

Needless to say, our portfolios all suffered. Thankfully, the damage was mitigated by the defensive measures that I took plus the strong performance of our oil & gas exploration stocks. Defensively, I raised some cash on Thursday and Friday by selling ACR, BEN, and MNST. In addition, I put on a 41% short hedge in the QQQQ mid day Friday. Our energy troika of CHK, SWN & UPL all had great weeks.

I made one small purchase of CRDN into Friday’s market weakness. Ceradyne made an all time high and is the premier growth company in the ceramic body armor market. Even if we pull out of Iraq, Ceradyne still has huge growth potential because it has barely penetrated the burgeoning market for its products. In other portfolio news I made quick purchases and sales of EBAY and QSII for tiny losses when it became apparent that the market was reversing to the downside.

In short, we are still making money and defense is the name of the game for now. Fear is in the air - see the VIX chart below -
and if I have to pare down more positions I will do whatever is necessary to protect our capital. At the same time, many opportunities will arise as a result of this wipeout and we will get our share. For example, I believe that the panic over the Attorney General's request for information from GOOG is overdone and will eventually lead to be a buying opportunity.

MODEL PORTFOLIO:

ACH Alum Corp China 3.5%
AIRM Air Methods 2.75%
BA Boeing 5.25%
CHK Chesapeake Energy 3.0%
CMED China Med Tech 3.75%
FDX Fedex 3.75%
GOOG Google 3.75%
HANS Hansen’s Natural 4.5%
ISRG Intuitive Surgical 4.5%
MO Altria 3.5%
NDAQ NASDAQ Stock Market 2.0%
NTRI Nutrisystems 3.5%
SNDK Sandisk 3.5%
SWN Southwestern Energy 3.5%
UNH United Health 4.5%
UPL Ultra Petroleum 5.0%
CASH Interest Bearing Acct 36.75%
QQQQ Short Hedge 41.0%

Managed Accounts Model Portfolio Tuesday Evening

2006-01-17T21:28:00.000-05:00

PORTFOLIO UPDATE:

The stock market had a broad based sell off today as oil prices rose to over $67 per barrel. Thankfully, our portfolios were spared any damage thanks to nice gains in our oil stocks and CMED which offset losses in FDX and HANS.

Fedex has been falling with the airline group due to higher energy prices. I think that Fedex will be fine because, unlike airlines, they are a growth company. Furthermore, they should be able to pass on higher energy costs to their customers if necessary. Hansen got knocked down by a ridiculous brokerage house downgrade and should bounce back very soon.

Unfortunately, tomorrow might not be so forgiving to us because the stock index futures are down big this evening. The futures have sold down do to poor earnings reports from Intel and Yahoo.
My instincts tell me that this type of sell off might become a buying opportunity as other stocks gap down in the morning

In any event, I made two small additions to our portfolios today. I repurchased SNDK, which had made a nice pullback and I bought Aluminum Corporation of China (ACH).

MODEL PORTFOLIO:

ACH Alum Corp China 3.5%
ACR American Retirement 3.0%
AIRM Air Methods 2.75%
BA Boeing 5.25%
BEN Franklin Resources 4.0%
CHK Chesapeake Energy 3.0%
CMED China Med Tech 3.75%
FDX Fedex 3.75%
GOOG Google 3.75%
HANS Hansen’s Natural 4.5%
ISRG Intuitive Surgical 4.5%
MO Altria 3.5%
MNST Monster Worldwide 3.5%
NDAQ NASDAQ Stock Market 2.0%
NTRI Nutrisystems 3.5%
SNDK Sandisk 3.5%
SWN Southwestern Energy 3.5%
UPL Ultra Petroleum 5.0%
UNH United Health 4.5%
CASH Interest Bearing Acct 29.25%

Managed Accounts Model Portfolio Weekend Review

2006-01-14T13:10:00.000-05:00

PORTFOLIO UPDATE:

Stock rotation and money management are the name of the game as far as I’m concerned right now. The rally in the major averages hit the wall last week, but underneath the surface there was a lot happening. Many individual stocks with special stories or great earnings made nice moves. I traded our portfolios accordingly.

Thus, with sound money management in mind, I trimmed extended positions, such as MFLX & NWRE. I also purchased stocks that are beginning to make their next up leg. Hence, I purchased the following stocks:

-American Retirement Corporation (ACR) broke out to a new high on Friday. ACR is a rapidly growing developer and manager of senior living communities in the USA.
-Intuitive Surgical (ISRG) broke out to a new high on Wednesday. ISRG produces the revolutionary Da Vinci robotic surgical system that is being installed a t all major hospitals in the country.
-Nutrisystems (NTRI) made a new high on Thursday. NTRI may or may not be a fad diet. However, the company is growing at over 100% compounded annually and has barely tapped the market for their products.
-Southwestern Energy (SWN) broke out to a new high on Friday. SWN is another oil and gas exploration company that is benefiting from the worldwide energy shortage and Iran’s use of oil and atomic weapons as a threat to the world.

In sum, Wall Street is celebrating the good start to the New Year and the rally will probably continue. I don’t know when this game of musical chairs will end. I do know that in order to stay in the race I have to keep on replacing extended positions with stocks that are just starting to move.

MODEL PORTFOLIO:

ACR American Retirement 3.0%
AIRM Air Methods 2.75%
BA Boeing 5.25%
BEN Franklin Resources 4.0%
CHK Chesapeake Energy 3.0%
CMED China Med Tech 3.75%
FDX Fedex 3.75%
GOOG Google 3.75%
HANS Hansen’s Natural 4.5%
ISRG Intuitive Surgical 4.5%
MO Altria 3.5%
MNST Monster Worldwide 3.5%
NDAQ NASDAQ Stock Market 2.0%
NTRI Nutrisystems 3.5%
SWN Southwestern Energy 3.5%
UPL Ultra Petroleum 5.0%
UNH United Health 4.5%
CASH Interest Bearing Acct 36.25%

Managed Accounts Model Portfolio Wednesday Evening

2006-01-11T21:27:00.000-05:00

PORTFOLIO UPDATE:

The stock market advance is starting to get speculative. The number of advancing issues is getting smaller and the intraday up and down swings are getting more violent. Many stocks have made parabolic moves. This type of action can not go on forever before the stock market takes a much needed breather in the form of a pause or correction.

One can see evidence of investor giddiness in such indicators as the overbought oversold oscillator and the put call ratio. Both indicators are in sell territory.
Nothing says that the market can not keep running despite these indicators, but I am becoming more cautious.

Since Monday, I have made a few purchases and sales. I repurchased ISRG on Tuesday when it broke out to a new high. I also bought and sold SHLD which appeared to be running but hit the wall and fell back. Today I purchased AIRM & BEN which both broke out to new highs. Franklin Resources is one of the World’s premier money management firms and is gobbling up all of the baby boomer’s retirement funds. Lastly, I added to our UPL position when it broke out to a new high and I sold our PEP which has been lagging.

MODEL PORTFOLIO:

AIRM Air Methods 2.75%
BA Boeing 5.25%
BEN Franklin Resources 4.0%
CHK Chesapeake Energy 3.0%
CMED China Med Tech 3.75%
FDX Fedex 3.75%
GOOG Google 3.75%
HANS Hansen’s Natural 4.5%
MFLX Multi-Fineline Comm 3.5%
MO Altria 3.5%
MNST Monster Worldwide 3.5%
NDAQ NASDAQ Stock Market 2.0%
NWRE Neoware 3.5%
UPL Ultra Petroleum 5.0%
UNH United Health 4.5%
CASH Interest Bearing Acct 47.75%
QQQQ Short Hedge 21.50%

Managed Accounts Model Portfolio Tuesday Morning

2006-01-10T06:48:00.000-05:00

PORTFOLIO UPDATE:

Yesterday the stock market rally continued and I took that as an opportunity to perform some portfolio management. I sold SNDK & TIE - two stocks that I like very much – after they made additional big moves in the morning. I want to buy Sandisk back, but will wait for a pullback or consolidation. Titanium Metals was sold after it bounced off its all time high. I might be early on both accounts, but I want to lock in some profits during this euphoric stock market phase.

Many stock market commentators are making a big deal about the Dow Jones Industrial Averages closing above the 11,000 level. Clearly, the stock market is in rally mode and most averages have made multi year highs. On the other hand, it’s all a matter of perspective. As one can see by the 2 Dow Jones Industrial Average charts to the right, things look great on the 3 year chart. However, when one views the 10 year chart, things look mediocre at best. My point is that we might be in some sort of cyclical bull phase right now, but we are no where near being in a long term secular bull market. The stock market is still way below the highs of the 1990s bull market.

The key take away here is not to get carried away with the media’s spin on things. Sound money management must always dictate our behavior. Therefore, if SNDK continues to blast without a pullback, so be it. Somewhere down the line we will get another chance. It happened with HANS last year and now we are back in it and making money. There will allways be another chance and no one can get out at the exact top.

MODEL PORTFOLIO:

BA Boeing 5.25%
CHK Chesapeake Energy 3.0%
CMED China Med Tech 3.75%
FDX Fedex 3.75%
GOOG Google 3.0%
HANS Hansen’s Natural 4.5%
MFLX Multi-Fineline Comm 3.5%
MO Altria 3.5%
MNST Monster Worldwide 3.5%
NDAQ NASDAQ Stock Market 2.0%
NWRE Neoware 3.5%
PEP Pepsico 5.75%
UPL Ultra Petroleum 3.5%
UNH United Health 4.5%
CASH Interest Bearing Acct 44.50%
QQQQ Short Hedge 21.50%

Managed Accounts Model Portfolio Weekend Review

2006-01-07T13:38:00.000-05:00

PORTFOLIO UPDATE:

As most investors know, the broad based New Year stock market rally continued throughout the entire week. Our portfolios all participated in the rally and I ratcheted up our long positions as the week went on. Obviously, the market can’t keep up this performance forever and is probably ready to pause and catch it's breath. I therefore put on a small QQQQ short hedge as insurance late in the week.

The new longs that were added to the portfolios were HANS & MNST. Hansen’s Natural was one of our greatest winners last year and I repurchased it when it started to pop up again on Friday. Monster Worldwide broke out to a new high on Friday. MNST is the fastest growing online job site in the world. Lastly, I added to our CMED position when it started to jump early in the week.

MODEL PORTFOLIO:

BA Boeing 5.25%
CHK Chesapeake Energy 3.0%
CMED China Med Tech 3.75%
FDX Fedex 3.75%
GOOG Google 3.75%
HANS Hansen’s Natural 4.5%
MFLX Multi-Fineline Comm 3.5%
MO Altria 3.5%
MNST Monster Worldwide 3.5%
NDAQ NASDAQ Stock Market 2.0%
NWRE Neoware 3.5%
PEP Pepsico 5.75%
SNDK Sandisk 3.5%
TIE Titanium Metals 3.5%
UPL Ultra Petroleum 3.5%
UNH United Health 4.5%
CASH Interest Bearing Acct 37.50%
QQQQ Short Hedge 21.50%

Managed Accounts Model Portfolio Tuesday Evening

2006-01-03T20:00:00.000-05:00

PORTFOLIO UPDATE:

The stock market started the New Year with a blast today by having a dazzling late afternoon rally that was triggered by the Federal Reserve Board's bullish comments in the minutes from their recent meeting. Unexpected or not, the stock market once again played havoc with everyone’s expectations.

As a consequence of the rally, we had a very good day and I made three purchases. I repurchased SNDK, TIE & UPL. Sandisk broke out to a new all time high; Titanium metals broke out of a base; and Ultra Petroleum started to rally with all of the oil stocks. I also sold GTE for a quick profit when it gapped up in the morning.

Several of our stocks had great days today. GOOG was up 20 points as one major brokerage firm raised their Google price target to $600. Neoware hit a new high and CMED started to bounce. Hopefully this rally will follow through as institutions try to make some quick gains.

MODEL PORTFOLIO:

BA Boeing 5.25%
CHK Chesapeake Energy 3.0%
CMED China Med Tech 2.25%
FDX Fedex 3.75%
GOOG Google 3.75%
MFLX Multi-Fineline Comm 3.5%
MO Altria 3.5%
NDAQ NASDAQ Stock Market 2.0%
NWRE Neoware 3.5%
PEP Pepsico 5.75%
SNDK Sandisk 3.5%
TIE Titanium Metals 3.5%
UPL Ultra Petroleum 3.5%
UNH United Health 4.5%
CASH Interest Bearing Acct 46.25%

Year End Wrap Up

2005-12-31T17:37:00.000-05:00

PORTFOLIO UPDATE:

The Dow Jones Industrial Averages got clobbered last week and ended down for the year. At one point on Wednesday, we were 61% in cash, but even that defensive measure was not enough for us to avoid some slight cuts in our gains.

Last Wednesday I sold WFMI which gapped up over 3 points after splitting and being added to the S&P 500. I love Whole Foods Markets and will look for a re-entry point at a later date. On Thursday I purchased MFLX after it upwardly revised it's earnings forecast and broke out to a new high. On Friday I purchased GTE which blasted higher after signing a $600 million contract to install and run a wireless internet network in Russia.

We enter the New Year with 54.5% in cash which will be ready to be deployed as events develop. There are many great stocks that I follow that are potential candidates for our portfolios. Of particular interest are America’s fastest growing companies as statistically detailed in Investors Business Daily. I’m also closely watching gold, energy, natural resource stocks, and Far Eastern Markets.

As I’ve stated before, I expect to see many crosscurrents in January. Slow and steady wins the race and we will have our share of opportunities as events unfold. The key is not to just out perform the market - it's not to lose money.

MODEL PORTFOLIO:

BA Boeing 5.25%
CHK Chesapeake Energy 3.0%
CMED China Med Tech 2.25%
FDX Fedex 3.75%
GOOG Google 3.0%
GTE GlobalTel Comm 3.0%
MFLX Multi-Fineline Comm 3.5%
MO Altria 3.5%
NDAQ NASDAQ Stock Market 2.0%
NWRE Neoware 3.5%
PEP Pepsico 5.75%
UNH United Health 4.5%
CASH Interest Bearing Acct 54.5%

Managed Accounts Model Portfolio Tuesday Evening

2005-12-27T23:05:00.000-05:00

PORTFOLIO UPDATE:

The Grinch stole Christmas - and my Hannukah Gelt too for that matter - as the stock market had one of the worst post Holiday declines ever recorded today. Despite taking immediate defensive measures as promised this past weekend, our portfolios took it on the chin today. The Dow Jones Industrial Averages fell 105 points and I raised our cash position to 58%.

At the opening I sold EWJ for over a 20% gain because the Japanese Stock Market at long last appears to be correcting. I also sold HANS which bounced off the top of its trading range for a nice gain. Lastly I sold HOMS for a breakeven trade.

To say that I was surprised by this sell off is an understatement. It’s not unprecedented, for the market to sell off this week, but this kind of extreme volatility - when most investors are away on vacation - is a very rare occurrence. Some people blamed the inversion of the yield curve for the market decline, but this phenominon had been telegraphed for months. Hopefully, this low volume bear raid will reverse itself tomorrow. In any event, they beat me to the punch today.

MODEL PORTFOLIO:

BA Boeing 5.25%
CHK Chesapeake Energy 3.0%
CMED China Med Tech 2.25%
FDX Fedex 3.75%
GOOG Google 3.0%
MO Altria 3.5%
NDAQ NASDAQ Stock Market 2.0%
NWRE Neoware 3.5%
PEP Pepsico 5.75%
UNH United Health 4.5%
WFMI Whole Foods Market 3.0%
CASH Interest Bearing Acct 58.0%

Weekend Review

2005-12-24T14:14:00.000-05:00

PORTFOLIO UPDATE:

We are now in the home stretch for 2005 with only four trading days to go. The only problem is that most of the horses have left the track. That leaves us with a lackluster final week of trading for the year with a probable upside bias. It is my intent to be as lean and mean as is possible starting the New Year. With this in mind I have already begun to trim back out holdings.

Last Thursday I sold our AAPL for a quick gain. I also sold one half of our positions in CMED and NDAQ. I like all three stocks but they are extended and vulnerable to any sell offs that might occur as 2006 begins.
I can always buy them back after things settle down in January.

I fully expect all types of crosscurrents to be prevalent in January. Many people will take profits in extended stocks, thus defraying capital gains taxes until 2007. Many funds will rebalance their portfolios as they place their bets for the coming year. Other people want to see how the new Fed Chairman will do.

All of this comes in the face of investor complacency as evidenced by various indicators that I follow. Thus, contrarian indicators are flashing warning signals. For example, the put/call ratio (above) is at levels where sell offs have begun in the past. The percentage of bulls is at a very high level. The VIX or volatility index is at a historically low level.

There are no guarantees that an early 2006 market decline will happen. All we have to go by are levels of risk. Right now the prudent thing to do is to trim the sails until we get a better picture of things. Hence, I hope to raise more cash and do more short term trading next week.

MODEL PORTFOLIO:

BA Boeing 5.25%
CHK Chesapeake Energy 3.0%
CMED China Med Tech 2.25%
EWJ I Shares Japan ETF 4.75%
FDX Fedex 3.75%
GOOG Google 3.0%
HANS Hansens Natural 4.0%
HOMS Homestore 2.50%
MO Altria 3.5%
NDAQ NASDAQ Stock Market 2.0%
NWRE Neoware 3.5%
PEP Pepsico 5.75%
UNH United Health 4.5%
WFMI Whole Foods Market 3.0%
CASH Interest Bearing Acct 46.75%

Managed Accounts Model Portfolio Thursday Morning

2005-12-22T07:49:00.000-05:00

PORTFOLIO UPDATE:

The stock market barely had its long awaited bounce yesterday, but it wasn’t easy. After rallying in the morning a vicious sell program hit the tape. Following the pattern of the last several days, stocks again gave back all of their gains and were under water at 3PM. However, this time they came up for air in the final hour.

We are now entering the seasonally strong “Santa Claus” rally period. I fully expect large institutions to support their positions through year end. Furthermore, all major portfolio adjustments and tax loss selling has been completed and many people are on vacation. Hence, there should be little overhead supply of stocks for sale. As a result, the market should have an upside bias through year end.

With this in mind, I took a small position in AAPL yesterday. Apple had been correcting its huge gains and just started to bounce. I also purchased FDX. Fedex broke out to a new high after reporting a blowout quarter in which sales rose by 33%. It is now quite clear that Fedex is one of the main beneficiaries of the online shopping revolution. More and more people are browsing at the mall but making their purchases online. As a consequence, FDX is getting the lion's share of the package delivery business. Merrill Lynch raised its price target on FedEx to $122.

MODEL PORTFOLIO:

AAPL Apple Computer 2.0%
BA Boeing 5.25%
CHK Chesapeake Energy 3.0%
CMED China Med Tech 4.5%
EWJ I Shares Japan ETF 4.75%
FDX Fedex 3.75%
GOOG Google 3.0%
HANS Hansens Natural 4.0%
HOMS Homestore 2.50%
MO Altria 3.5%
NDAQ NASDAQ Stock Market 4.0%
NWRE Neoware 3.5%
PEP Pepsico 5.75%
UNH United Health 4.5%
WFMI Whole Foods Market 3.0%
CASH Interest Bearing Acct 40.5%

Managed Accounts Model Portfolio Wednesday Morning

2005-12-21T00:37:00.000-05:00

PORTFOLIO UPDATE:

The stock market malaise continued for yet another day today but the downside momentum seemed to wane as the day wore on. Furthermore, there were some signs of strength late in the day.

In keeping with my policy of playing tight defense, I sold SBUX for a slight loss. I also sold one half of our GOOG position when it fortuitously gapped up around 5 points in the morning. Starbucks was acting very poorly and Google made a downward spike reversal yesterday.

On the plus side I repurchased HANS. Hansens Natural appears to have made a bottom after pulling back from its long bullish run. Today HANS was up almost 5 points as a consequence of an analyst upgrade to their 2006 earnings estimate.

MODEL PORTFOLIO:

BA Boeing 5.25%
CHK Chesapeake Energy 3.0%
CMED China Med Tech 4.5%
EWJ I Shares Japan ETF 4.75%
GOOG Google 3.0%
HANS Hansens Natural 4.0%
HOMS Homestore 2.50%
MO Altria 3.5%
NDAQ NASDAQ Stock Market 4.0%
NWRE Neoware 3.5%
PEP Pepsico 5.75%
UNH United Health 4.5%
WFMI Whole Foods Market 3.0%
CASH Interest Bearing Acct 46.25%

Managed Accounts Model Portfolio Monday Evening

2005-12-17T13:17:00.000-05:00

PORTFOLIO UPDATE:

Today’s stock market was as nasty as they come. After being up nicely in the morning, stocks fell off a cliff in the afternoon. A prime example of this carnage was GOOG, which fell 25 points from its high to its low for the day. It goes without saying that I am perplexed by this action which may have been caused by the completion of last week’s option expiration and index rebalancing. All we can do is play defense until the storm subsides.

This morning I took a small position in NWRE which broke out to an all time high. Neoware is the 5th fastest growing company in the USA according to IBD. Neoware makes software and hardware for “thin” corporate networks. In layman’s terms Neoware’s products make sure that communications from remote locations within corporate networks are not corrupted by computer viruses or theft of data.

I also added to our CMED position this morning. China Medical started to make a run toward its highs only to reverse with the market later in the day. I don’t like having the rug pulled out from under us and will sell the incremental CMED shares if I have to. In addition, I sold ADBE for around a 10% profit in 2 weeks time.

On a final note, the sell off in GOOG appears to be in part caused by statements coming from Carl Icahn who disapproves of Google’s deal to purchase 5% of AOL from Time Warner. Carl Icahn is a corporate “green mailer” who is trying to use his three percent ownership of Time Warner as leverage to break up Time Warner. My gut reaction is that he is going to lose this battle. Three percent is not a large enough position for Icahn to get a seat on Time Warner’s board. Time Warner Chairman, Richard Parsons is a tough customer and has no use for Icahn. Google has deep pockets and will do whatever it takes to make this deal work.

MODEL PORTFOLIO:

BA Boeing 5.25%
CHK Chesapeake Energy 3.0%
CMED China Med Tech 4.5%
EWJ I Shares Japan ETF 4.75%
GOOG Google 6.0%
HOMS Homestore 2.50%
MO Altria 3.5%
NDAQ NASDAQ Stock Market 4.0%
NWRE Neoware 3.5%
PEP Pepsico 5.75%
SBUX Starbucks 3.25%
UNH United Health 4.5%
WFMI Whole Foods Market 3.0%
CASH Interest Bearing Acct 46.5%

Managed Accounts Model Portfolio Thursday Evening

2005-12-15T19:41:00.000-05:00

PORTFOLIO UPDATE:

It’s mea culpa time. I closed out my worst investment of the year today. ATCO was an exception to my rules of investing and unfortunately we paid for it. I let my excitement over a new technology get the better of me and I broke my own rules. American Technology’s management lied to us when they raised guidance during a recent secondary, only to lower it three weeks later. The chart said to sell and I didn’t. The moral of the story is to stick to one’s own knitting and do not change disciplines –no matter how small the position. Investing in proven winners is what brought us to the dance and keeping tight stops is what kept us there.

Today the market continued to erode in the face of monthly options expiration and the rebalancing of the NASDAQ 100. Nevertheless, a few buying opportunities arose. I purchased Mo which broke out to a new high after it won a major court victory. Altria -AKA Philip Morris- is now free to spin off its divisions which many analysts believe are worth 30% more than MO’s current price. I also, purchased CHK after learning that their Chairman bought 750,000 shares for his personal account last week. Chesapeake energy is one of the top natural gas producers in the world and is in play since Conoco’s buyout of Burlington Resources. Lastly, I added to GOOG which has to be bought as part of the NASDAQ rebalancing.

MODEL PORTFOLIO:

ADBE Adobe Systems 3.5%
BA Boeing 5.25%
CHK Chesapeake Energy 3.0%
CMED China Med Tech 3.0%
EWJ I Shares Japan ETF 4.75%
GOOG Google 6.0%
HOMS Homestore 2.50%
MO Altria 3.5%
NDAQ Nasdaq Stock Market 4.0%
PEP Pepsico 5.75%
PWAV Powerwave 3.5%
SBUX Starbucks 3.25%
UNH United Health 4.5%
UPL Ultra Petroleum 4.0%
WFMI Whole Foods Market 3.0%
CASH Interest Bearing Acct 40.50%

Managed Accounts Model Portfolio Thursday Morning

2005-12-15T03:10:00.000-05:00

PORTFOLIO UPDATE:

Yesterday was a tale of two markets. The S&P 500 stocks went up and the NASDAQ went down. Many market commentators were perplexed by this dichotomy. Most attributed the NASDAQ underperformance to the rebalancing scheduled for the NASDAQ 100 index this week. Some mentioned options expiration and year end portfolio updating by large institutional investors. Whichever poison one picks, it was a bumpy ride for us in which we under performed the market the past two days. So much for my “rope a dope” analogy last week!

Adding to our pain today was a highly critical Wall Street Journal article about Cerner’s accounting practices. This kiss of death accusation caused CERN to crater and I quickly sold our position. Once again one of America’s top companies is under attack for unethical business practices. From my perspective, its better to be safe than sorry until the dust settles.

In other matters, I covered our QQQQ short hedge for a small profit. I also sold TECH for a small loss. These moves were meant to further cut risk in this topsy turvy market.

On the bright side BA made a new high as their 787 passenger jet continues to be a huge success. I added to our Boeing position. Boeing has already surpassed all sales records with this long distance fuel efficient aircraft. The 787 is rapidly becoming the new world standard bearer and is making the Air Bus jumbo jet look like a blunder.

MODEL PORTFOLIO:

ADBE Adobe Systems 3.5%
ATCO American Tech 3.5%
BA Boeing 5.25%
CMED China Med Tech 3.0%
EWJ I Shares Japan ETF 4.75%
GOOG Google 4.0%
HOMS Homestore 2.50%
NDAQ Nasdaq Stock Market 4.0%
PEP Pepsico 5.75%
PWAV Powerwave 3.5%
SBUX Starbucks 3.25%
UNH United Health 4.5%
UPL Ultra Petroleum 4.0%
WFMI Whole Foods Market 3.0%
CASH Interest Bearing Acct 46.50%

Managed Accounts Model Portfolio Wednesday Morning

2005-12-14T00:35:00.000-05:00

PORTFOLIO UPDATE:

The December stock market roller coaster ride continued to harass us today. This time the stock market went up and our portfolios went down. I suspect that today's strange performance had to do with institutional investors positioning their trades around the Fed's decision to raise interest rates

As 2005 comes to a close it is apparent that it is time to let go of any extended stocks and to take profits on trades quickly. There is too much risk in the air and I want to be more flexible when the New Year begins. January should be filled with crosscurrents as institutional investors clean up their portfolios from 2005 and begin to redeploy capital for 2006.

I sold three positions today. I took our profits in NBR after a great one week run. I sold NTRI for around a 40% net gain. Finally, I sold ELOS after we got blindsided by a sell recommendation from the ubiquitous Cramer and by a patent infringement suit against another laser equipment manufacturer.

In other action, I shorted the QQQQs as a hedge against our portfolios and I made a small purchase of TECH which is trying to break out to a new high.

In short, the year is coming to a close and I want to be very nimble. Its time to reassess our posture for the upcoming year. At the same time I want to participate in any seasonal year end strength given the chance.

MODEL PORTFOLIO:

ADBE Adobe Systems 3.5%
ATCO American Tech 4.0%
BA Boeing 3.5%
CERN Cerner 4.0%
CMED China Med Tech 3.0%
EWJ I Shares Japan ETF 4.75%
GOOG Google 4.0%
HOMS Homestore 2.50%
NDAQ Nasdaq Stock Market 4.0%
PEP Pepsico 5.75%
PWAV Powerwave 3.5%
SBUX Starbucks 3.25%
TECH Techne 2.5%
UNH United Health 4.5%
UPL Ultra Petroleum 4.0%
WFMI Whole Foods Market 3.0%
CASH Interest Bearing Acct 40.25%
QQQQ Short Hedge 20.0

Managed Accounts Model Portfolio Friday Morning

2005-12-09T01:45:00.000-05:00

PORTFOLIO UPDATE:

Here we go again. Another day went by and another stock market sell off occurred. However, this time there were two big exceptions. Our portfolios made money and the oil service stocks broke out to new highs. The fact that we made money is a good sign. Much like Ali’s “Rope a Dope” we withstood all of the punishment that the market threw at us and still came out standing.

I made two purchases today. I bought PWAV and NBR which both broke out to new highs. Powerwave manufactures components for the rapidly growing wireless network industry. Nabors is one of the premier oil service companies in the world. NBR will get a major piece of the worldwide demand for oil drilling services. It looks like the oil exploration and service stocks are making a new run as worldwide demand for energy continues to far outstrip supply.

MODEL PORTFOLIO:

ADBE Adobe Systems 3.5%
ATCO American Tech 4.0%
BA Boeing 3.5%
CERN Cerner 4.0%
CMED China Med Tech 3.0%
ELOS Syneron Medical 2.5%
EWJ I Shares Japan ETF 4.75%
GOOG Google 4.0%
HOMS Homestore 2.50%
NBR Nabors Industries 3.75%
NDAQ Nasdaq Stock Market 4.0%
NTRI Nutri Systems 4.5%
PEP Pepsico 5.75%
PWAV Powerwave 3.5%
SBUX Starbucks 3.25%
UNH United Health 4.5%
UPL Ultra Petroleum 4.0%
WFMI Whole Foods Market 3.0%
CASH Interest Bearing Acct 32.0%

Managed Accounts Model Portfolio Thursday Morning

2005-12-08T07:25:00.000-05:00

PORTFOLIO UPDATE:

Yesterday's market was another bummer. It appears that the stock market is going through a churning correction. The averages seem to go up for one or two days and then go back down. This sideways move will probably resolve itself to the upside at least through the end of the year. It goes without saying that this type of whipsaw action is my least favorite environment to trade in because there are so many head fakes in either direction.

It's not my style to have the rug pulled out from under me without taking defense action. I therefore sold three positions. I took profits in ESRX. I also sold ASEI and INGR for small losses after they broke below support.

We are going to have to be very nimble to make money in this environment. Hopefully, this isn't the start of worse things to come for the stock market.

MODEL PORTFOLIO:

ADBE Adobe Systems 3.5%
ATCO American Tech 4.0%
BA Boeing 3.5%
CERN Cerner 4.0%
CMED China Med Tech 3.0%
ELOS Syneron Medical 2.5%
EWJ I Shares Japan ETF 4.75%
GOOG Google 4.0%
HOMS Homestore 2.50%
NDAQ Nasdaq Stock Market 4.0%
NTRI Nutri Systems 4.5%
PEP Pepsico 5.75%
SBUX Starbucks 3.25%
UNH United Health 4.5%
UPL Ultra Petroleum 4.0%
WFMI Whole Foods Market 3.0%
CASH Interest Bearing Acct 39.25%

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Managed Accounts Model Portfolio

2005-12-06T23:03:00.000-05:00

PORTFOLIO UPDATE:

Everything was going perfect today until 3:00 PM. All of our portfolios were at their highest points of the year and then the bottom fell out. A vicious sell program hit the tape and 75% of our gains for the day were wiped out. Oh well, tomorrow is another day.

This morning I made two additions to our portfolios. I brought GOOG back up to 4% long and I purchased ELOS. Syneron Medical is an Israeli manufacturer of cutting edge cosmetic surgery equipment. ELOS is one of the fastest growing medical companies in the world and broke out to an all time high today. On a positive note HOMS blasted out to another all time high and I sold almost one half of the position.

In light of today’s market reversal, I will be very quick to make sales tomorrow. I still believe that this rally has some legs, but we’re not in Kansas anymore.

MODEL PORTFOLIO:

ADBE Adobe Systems 3.5%
ASEI American Sci & Eng 3.0%
ATCO American Tech 4.0%
BA Boeing 3.5%
CERN Cerner 4.0%
CMED China Med Tech 3.0%
ELOS Syneron Medical 2.5%
ESRX Express Scripts 3.5%
EWJ I Shares Japan ETF 4.75%
GOOG Google 4.0%
HOMS Homestore 2.50%
INGR Intergraph 3.5%
NDAQ Nasdaq Stock Market 4.0%
NTRI Nutri Systems 4.5%
PEP Pepsico 5.75%
SBUX Starbucks 3.25%
UNH United Health 4.5%
UPL Ultra Petroleum 4.0%
WFMI Whole Foods Market 3.0%
CASH Interest Bearing Acct 29.25%

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Managed Accounts Model Portfolio Monday Evening

2005-12-05T22:02:00.000-05:00

PORTFOLIO UPDATE:

Last Thursday the stock market rallied and we had a mediocre day. The last two days the stock market fell and we had nice days. As my Grandma Lillie used to say, "yeah sure - go figure." I figure that that extended stocks are getting hit and our strategy of selling extended stocks and quickly discarding weak stocks is helping.

As I promised on Saturday, I purchased ADBE today. I also purchased CMED and INGR today. China Medical Technologies is a rapidly growing manufacturer and distributor of cancer treatment equipment. CMED has a virtual monopoly in China and is partially owned by General Electric. INGR has been a great growth story and has steadily gone up in value over the past year. Intergraph broke out of a base to an all time high today.

On a final note, I am pleased to say that LEXR got crushed today. Sometimes we get lucky and our sale pf LEXR last Friday shows that it's always better to be safe than sorry.

MODEL PORTFOLIO:

ADBE Adobe Systems 3.5%
ASEI American Sci & Eng 3.0%
ATCO American Tech 4.0%
BA Boeing 3.5%
CERN Cerner 4.0%
CMED China Med Tech 3.0%
ESRX Express Scripts 3.5%
EWJ I Shares Japan ETF 4.75%
GOOG Google 2.0%
HOMS Homestore 4.75%
INGR Intergraph 3.5%
NDAQ Nasdaq Stock Market 4.0%
NTRI Nutri Systems 4.5%
PEP Pepsico 5.75%
SBUX Starbucks 3.25%
UNH United Health 4.5%
UPL Ultra Petroleum 4.0%
WFMI Whole Foods Market 3.0%
CASH Interest Bearing Acct 31.50%

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Managed Accounts Model Portfolio Weekend Review

2005-12-03T16:49:00.000-05:00

PORTFOLIO UPDATE:

Friday’s market was a dud, with no follow through from Thursday’s great rally. After selling many of our extended positions over the past few weeks - such as AAPL, HANS, & TIE - I have been rebuilding our portfolio with stocks that are just beginning to make moves. In an overbought but still rallying stock market, the best thing that one can do is to follow a strategy of rotating one’s portfolio from extended stocks to emerging stocks.

One such purchase was UPL on Friday. Ultra Petroleum is the world’s fastest growing oil and gas exploration company. It ranks tenth in the Investors Business Daily "IBD 100" database of the fastest growing companies. After consolidating for two months, UPL has broken out to the upside and appears ready for a new run.

Another stock that I hope to purchase next week is ADBE. Adobe Systems is a world class. growth company whose stock broke out to an all time high Friday. Adobe’s merger with Macromedia is closing today. Adobe's share price was held back by arbitragers who sold Adobe and purchased MACR prior to today.

On a final note, I sold LEXR on Friday after the stock whipsawed down in price. Frankly I had second thoughts about Lexar in view of all the competition coming into play in the flash media market.

MODEL PORTFOLIO:

ASEI American Sci & Eng 3.0%
ATCO American Tech 4.0%
BA Boeing 3.5%
CERN Cerner 4.0%
ESRX Express Scripts 3.5%
EWJ I Shares Japan ETF 4.75%
GOOG Google 4.0%
HOMS Homestore 4.75%
NDAQ Nasdaq Stock Market 4.0%
NTRI Nutri Systems 4.5%
PEP Pepsico 5.75%
SBUX Starbucks 3.25%
UNH United Health 4.5%
UPL Ultra Petroleum 4.0%
WFMI Whole Foods Market 3.0%
CASH Interest Bearing Acct 39.50%

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Managed Accounts Model Portfolio Thursday Evening

2005-12-01T18:38:00.000-05:00

PORTFOLIO UPDATE:

What a difference a day makes. As I said yesterday its time to play defense – not! This morning the stock market gapped up and continued to rally all day. As a consequence I covered our QQQQ short hedge for a small loss and put some capital back to work. In a nutshell, there is no sense fighting the tape, because the market is always right.

In keeping with the theme of buying fresh breakouts I made three purchases today. My first purchase was LEXR which broke out to a new high. Lexar Media is a rapidly
growing flash memory manufacturer. LEXR was put into play recently when financier
(read green mailer) Carl Icahn, took a stake in the company. My second purchase was HOMS which also broke out to an all time high. Homestore has the ultimate website for the residential and commercial real estate industry. Famed technology investor, Roger McNamee just invested $100 million in HOMS. My final purchase was SBUX which also made a new high. Starbucks announced fabulous same store sales and monthly growth after the close.

MODEL PORTFOLIO:

ASEI American Sci & Eng 3.0%
ATCO American Tech 4.0%
BA Boeing 3.5%
CERN Cerner 4.0%
ESRX Express Scripts 3.5%
EWJ I Shares Japan ETF 4.75%
GOOG Google 4.0%
HOMS Homestore 4.75%
LEXR Lexar Media 3.5%
NDAQ Nasdaq Stock Market 4.0%
NTRI Nutri Systems 4.5%
PEP Pepsico 5.75%
SBUX Starbucks 3.25%
UNH United Health 4.5%
WFMI Whole Foods Market 3.0%
CASH Interest Bearing Acct 40.0%

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Managed Accounts Model Portfolio Wednesday Evening

2005-11-30T22:16:00.000-05:00

PORTFOLIO UPDATE:

The stock market correction continued today and our defensive posture helped us to weather the storm relatively unscathed. Until this sell off is over I intend to sell portfolio stocks that act poorly. I also intend to keep my purchases small. I will buy only those stocks that break out to new highs or that pull back to sensible buying zones.

Keeping with these themes, this morning I cut our GOOG position down to only 2% of our portfolios. I also sold GME which has been a big dud despite the introduction of the Microsoft Xbox 360.

On the long side of the ledger, I made a small purchase of NDAQ. NDAQ - The NASDAQ Stock Market - has had an amazing run this year and has been growing rapidly under its skillful management. NDAQ has had a nice pullback and should continue to benefit from the worldwide trend toward consolidation and expansion of electronic markets. As a matter of full disclosure, I own options to purchase NDAQ at $15 per share and $16 per share.

MODEL PORTFOLIO:

ASEI American Sci & Eng 3.0%
ATCO American Tech 4.0%
BA Boeing 3.5%
CERN Cerner 4.0%
ESRX Express Scripts 3.5%
EWJ I Shares Japan ETF 4.75%
GOOG Google 4.0%
NDAQ Nasdaq Stock Market 2.5%
NTRI Nutri Systems 4.5%
PEP Pepsico 5.75%
UNH United Health 4.5%
WFMI Whole Foods Market 3.0%
CASH Interest Bearing Acct 53.0%
QQQQ Short Hedge 35.0%

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Managed Accounts Model Portfolio Wednesday Morning

2005-11-30T09:25:00.000-05:00

PORTFOLIO UPDATE:

Yesterday the NASDAQ got taken to the woodshed while the S&P 500 remained relatively unscathed. In the morning I played some defense by taking a 35% short position in the QQQQ as a hedge against our longs. In addition, I pared our GOOG long down to 4% of our portfolios. Google was eventually down around 20 points during the day and it appears that the King is finally pulling back and consolidating.

Finaly, I took a small long position in ESRX which has been reporting blowout earnings and broke out to a new high. Express Scripts raised earnings guidance upwards yesterday.

In short, its time to play defense. I intend to keep all of our holdings on a tight leash until this stock market storm abates.

MODEL PORTFOLIO:

ASEI American Sci & Eng 3.0%
ATCO American Tech 4.0%
BA Boeing 3.5%
CERN Cerner 4.0%
ESRX Express Scripts 3.5%
EWJ I Shares Japan ETF 4.75%
GME Gamestop 5.0%
GOOG Google 4.0%
NTRI Nutri Systems 4.5%
PEP Pepsico 5.75%
UNH United Health 4.5%
WFMI Whole Foods Market 3.0%
CASH Interest Bearing Acct 50.5%
QQQQ Short Hedge 35.0%

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2005-11-28T16:55:00.000-05:00

PORTFOLIO UPDATE:

Breaking up is hard to do, but eventually it’s the right thing to do with every stock. When a stock climbs so high that you are patting yourself on the back for being smart it’s probably time to sell. With that thought in mind, I sold the balance of our AAPL today. Apple has been a great growth story and the IPOD era probably has a long way to go. Nevertheless, at this juncture Apple is extended and we’ve had a great run. I want to buy AAPL back if it pulls back & consolidates. I wouldn’t be surprised if Apple makes one more run into the month end, but I’m done walking the tightrope.

To a much lesser degree, the same logic applies to QSII, which I sold last Friday.
Quality Systems is one of America’s fastest growing companies according to Investors Business Daily. Just like AAPL, I will keep my eyes on QSII for another buying opportunity. On a final note I sold OSUR today for a slight profit. I had to cut some risk and Orasure was acting weak.

The stock market suffered a well deserved bout of post holiday indigestion today. We are now 52.75% in cash which is ready to be deployed if and when the year end rally continues.

MODEL PORTFOLIO:

ASEI American Sci & Eng 3.0%
ATCO American Tech 4.0%
BA Boeing 3.5%
CERN Cerner 4.0%
EWJ I Shares Japan ETF 4.75%
GME Gamestop 5.0%
GOOG Google 6.0%
NTRI Nutri Systems 4.5%
PEP Pepsico 5.75%
UNH United Health 4.5%
WFMI Whole Foods Market 3.0%
CASH Interest Bearing Acct 52.75%

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Managed Accounts Model Portfolio Pre Thanksgiving Holiday

2005-11-23T08:00:00.000-05:00

PORTFOLIO UPDATE:

I have been spending a lot of time lately reluctantly selling winning positions. When great stocks shoot up like rockets and make parabolic moves one must do some selling. This approach is counter intuitive to human nature. It’s only natural to want to hold onto your winners, but as we all know hogs always lose.

One of the great Wall Street maxims is to cut your losses and let your profits run. My point is that there comes a time after your profits have run when one must start to sell. The selling can be done in stages, because nobody can call the exact top consistently.

Yesterday, I sold the balance of TIE .
and trimmed back our holdings in QSII. As much as I like both stocks, they have made amazing moves and I must therefore show some discipline. I can always buy them back after they pull back and consolidate

One example of this approach has been my trading of AAPL. After Apple more than doubled I sold the position last April. I kept my eyes on Apple and watched it sell down and consolidate for four months. Eventually, I bought AAPL back in August as its prospects brightened and it broke out to a new high. We thus avoided what was potentially a risky period and we were able to deploy our capital in other areas until it was OK to buy Apple again. Hopefully, we will be able to purchase TIE, HANS & SHLD again under similar circumstances.

MODEL PORTFOLIO:

AAPL Apple Computer 3.0%
ASEI American Sci & Eng 3.0%
ATCO American Tech 4.0%
BA Boeing 3.5%
CERN Cerner 4.0%
EWJ I Shares Japan ETF 4.75%
GME Gamestop 5.0%
GOOG Google 6.0%
NTRI Nutri Systems 4.5%
OSUR Orasure 2.25%
PEP Pepsico 5.75%
QSII Quality Systems 2.25%
UNH United Health 4.5%
WFMI Whole Foods Market 3.0%
CASH Interest Bearing Acct 45.25%

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Managed Accounts Model Portfolio Tuesday Morning

2005-11-22T02:29:00.000-05:00

PORTFOLIO UPDATE:

The Thanksgiving holiday rally continued after a brief sell off this morning. Our portfolios were only up modestly because we were ambushed by SNDK which fell a whopping 9 points today after being mugged by news that Intel and Micron formed a new venture to compete with them. Fortunately, I sold SNDK when it was "only" down around 3 ½ points in the morning as it broke support on the chart.

On the plus side of the ledger, AAPL, GME, GOOG, QSII & TIE all made new highs. Google was up over 9 points and Titanium metals went parabolic rising another 3.7 points. Gamestop broke to a new high because the Microsoft X-Box 360 was released for sale today.

I made two new purchases this afternoon. I repurchased BA which broke out to a new high after announcing some huge sales to China. I also took an initial position in OSUR, which is starting to break out to a new high. Orasure should benefit from the “January Effect” of small cap stocks rallying prior to the New Year. Since so many people on Wall Street know that historically small caps have rallied in early January, they jump the gun and buy them in December.

MODEL PORTFOLIO:

AAPL Apple Computer 3.0%
ASEI American Sci & Eng 3.0%
ATCO American Tech 5.0%
BA Boeing 3.5%
CERN Cerner 4.0%
EWJ I Shares Japan ETF 4.75%
GME Gamestop 5.0%
GOOG Google 6.0%
NTRI Nutri Systems 4.5%
OSUR Orasure 2.25%
PEP Pepsico 3.0%
QSII Quality Systems 3.75%
TIE Titanium Metals 2.5%
UNH United Health 4.5%
WFMI Whole Foods Market 3.0%
CASH Interest Bearing Acct 42.0%

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Managed Accounts Model Portfolio Weekend Review

2005-11-19T16:58:00.000-05:00

PORTFOLIO UPDATE:

The stock market rally continued with barely a respite last week. Next week is the seasonally strong Thanksgiving Holiday period and we can therefore expect much of the same. Hence, I covered one half of our QQQQ short hedge for a small loss.

The stock market is short term overbought, but as one can see in the following charts, it is no where near intermediate term overbought. In addition, investor sentiment has now swung to very bullish as represented in the CBOE put call ratio chart below. When investors get too bullish, that eventually becomes a negative for the market.

The above conundrum is representative of the difficulty of trading in this environment. Short term, the market has sprinted far and fast and is therefore tired. Intermediate term, the market has further to go and many investors are desperate to get in. The result is that the market doesn't pause to catch its breath and instead literally runs on adrenaline.

In keeping with the theme of buying breakouts and selling extended or broken positions, I sold GILD last Thursday. Gilliad made a tremendous move for us and was starting to face some FDA scrutiny over Tamiflu vaccine deaths in Japan. Like many other stocks that I have sold, Gilliad is on my watch list for repurchase if it pulls back or consolidates.

MODEL PORTFOLIO:

AAPL Apple Computer 3.0%
ASEI American Sci & Eng 3.0%
ATCO American Tech 5.0%
CERN Cerner 4.0%
EWJ I Shares Japan ETF 4.75%
GME Gamestop 5.0%
GOOG Google 6.0%
NTRI Nutri Systems 4.5%
PEP Pepsico 3.0%
QSII Quality Systems 3.75%
SNDK Sandisk 2.75%
TIE Titanium Metals 2.5%
UNH United Health 4.5%
WFMI Whole Foods Market 3.0%
CASH Interest Bearing Acct 45.0%
QQQQ Short Hedge 17.5.0%

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Managed Accounts Model Portfolio Tuesday Evening

2005-11-16T00:14:00.000-05:00

PORTFOLIO UPDATE:

Today the stock market had a broad based sell off. Most of our stocks got hit and I took some more defensive measures by shorting the QQQQ as a hedge against our longs. I view this position as a trade which should protect our portfolios during what hopefully will be some short term turbulence within the context of a year end rally.

I also sold the remainder of ours HANS which gapped up several points this morning and then reversed sharply down. Hansen's is still one of my favorite stocks and has been very good to us. We doubled our money in our March to June trade and we made around 45% on this last 3 week trade. I hope to buy HANS back again if it sells off and consolidates.

On the bright side for our portfolios, CERN and AAPL made all time highs and WFMI made a nice comeback. On the bright side for the stock market, energy prices are lower; Ben Bernanke is winning respect as the nominee for Federal Reserve Board Chairman; and President Bush is trying to fight back out of the sub basement of poor job ratings. Furthermore, corporate profits are doing just fine and GDP growth is still in the sweet spot.

I therefore believe that the glass is half full through year end. Next year we will have to face the very serious problems of a spent up consumer who has refinanced his home in order to gain purchasing power. The new Fed chairman is going to have to pull off quite a trick to offset the housing price declines and the federal budget tightening processes that have already begun.

MODEL PORTFOLIO:

AAPL Apple Computer 3.0%
ASEI American Sci & Eng 3.0%
ATCO American Tech 5.0%
CERN Cerner 4.0%
EWJ I Shares Japan ETF 4.75%
GILD Gilliad Sciences 2.5%
GME Gamestop 5.0%
GOOG Google 6.0%
NTRI Nutri Systems 4.5%
PEP Pepsico 3.0%
QSII Quality Systems 3.75%
SNDK Sandisk 2.75%
TIE Titanium Metals 2.5%
UNH United Health 4.5%
WFMI Whole Foods Market 3.0%
CASH Interest Bearing Acct 42.5%
QQQQ Short Hedge 35.0%

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Managed Accounts Model Portfolio Monday Evening

2005-11-15T00:32:00.000-05:00

PORTFOLIO UPDATE:

How does one trade an extended overbought market that one believes is in rally mode at least through the end of the year? My answer is very actively and nimbly. This means to pare down or sell extended positions or broken positions. With this in mind I sold GE and VCLK which both broke down below support. Maybe these stocks will work out, but the air is very thin up here.

It also means to only purchase those stocks that are breaking out of bases. Hence, I purchased QSII which made the first day of a move today. Quality Systems is one of the 20 fastest growing companies in the USA according to Investors Business Daily.

In short, the odds still favor the bulls, but I wouldn't bet against a few bumps in the road along the way.

MODEL PORTFOLIO:

AAPL Apple Computer 3.0%
ASEI American Sci & Eng 3.0%
ATCO American Tech 5.0%
CERN Cerner 4.0%
EWJ I Shares Japan ETF 4.75%
GILD Gilliad Sciences 2.5%
GME Gamestop 5.0%
GOOG Google 6.0%
HANS Hansens Natural 4.0%
NTRI Nutri Systems 4.5%
PEP Pepsico 3.0%
QSII Quality Systems 3.75%
SNDK Sandisk 2.75%
TIE Titanium Metals 2.5%
UNH United Health 4.5%
WFMI Whole Foods Market 3.0%
CASH Interest Bearing Acct 38.5%

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Managed Accounts Model Portfolio Weekend Review

2005-11-12T17:48:00.000-05:00

PORTFOLIO UPDATE:

The beast will not die! Despite being overbought and despite investors becoming more bullish - see charts below - the stock market rally did not even pause for pre-weekend profit taking on Friday. When I pointed out Marty Zweig's words in my last post, I forgot to mention that he had statistics going back many years which confirmed his thesis. He also said that no one indicator is perfect and that all stock market timing was a matter of odds.

Right now the odds favor the bulls, but as always I am cautious and will sell whenever the situation calls for it. On Friday I therefore sold COST because it broke down below support. We have been "whipsawed" by a few new positions like CLHB, COST and VPHM lately. That might be a sign of market rotation into new groups or an extended market getting tired.

Despite what my over all market opinion is, proper risk control and the use of stop loss points takes precedence over everything in order to protect our capital.

MODEL PORTFOLIO:

AAPL Apple Computer 3.0%
ASEI American Science & Eng 3.0%
ATCO American Technology 5.0%
CERN Cerner 4.0%
EWJ I Shares Japan ETF 4.75%
GE General Electric 6.0%
GILD Gilliad Sciences 2.5%
GME Gamestop 5.0%
GOOG Google 6.0%
HANS Hansens Natural 4.0%
NTRI Nutri Systems 4.5%
PEP Pepsico 3.0%
SNDK Sandisk 2.75%
TIE Titanium Metals 2.5%
UNH United Health 4.5%
VCLK Valueclick 3.5%
WFMI Whole Foods Market 3.0%
CASH Interest Bearing Acct 32.75%

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Managed Accounts Model Portfolio Thursday Evening

2005-11-10T20:32:00.000-05:00

PORTFOLIO UPDATE:

Marty Zweig used to say that there was one great exception about trading in overbought or oversold markets. At the beginning of any very strong rally an overbought market tends to stay overbought. Well folks, we've just had a very strong rally that is very overbought. Ordinarily this market would be correcting but it is still going up. That is because many people have missed the rally and are anxious to get in. Therefore, every time the market hints at correcting, the people who missed the boat rush to get in.

As a result of this condition, I have covered our QQQQ short hedge for a tiny loss. I have also brought our long position up to the highest level of the year at 71.5%. Today I purchased the following stocks:

1- GE is starting to breakout to the upside as the entire financial sector is starting to rally. General Electric has been growing fabulously, but has been held back until now do to its interest rate sensitive GE Capital division.

2- COST broke out to a new high. I suspect that cost sensitive retailers like Costco will benefit as the economy slows down.

3- Sandisk has pulled back since we sold it and now looks like its ready to resume its rise. SNDK is a major beneficiary of the IPOD revolution.

4- ASEI reported amazing earnings yesterday as demand for its scanning systems explodes. American Science & Engineering makes scanners for airport security that can detect any type of explosive device on people. These scanners expose people to only 1/1000th the radiation that Xrays emit.

5- GOOG has pulled back enough so I brought our Google exposure back up to 6%.

In other portfolio news, I sold VPHM. Viropharma broke below support today on news of competition to its anti cancer drug business. In addition, WFMI took a big hit today as it reported fine growth but had disappointing profits - allegedly due to Hurricane Katrina. Whole Foods is a great company and I believe that this is just a short term setback. They also reported a two for one stock split, a four dollar per share special dividend and a stock buyback program.

MODEL PORTFOLIO:

AAPL Apple Computer 3.0%
ASEI American Science & Eng 3.0%
ATCO American Technology 5.0%
CERN Cerner 4.0%
COST Costco 4.25%
EWJ I Shares Japan ETF 4.75%
GE General Electric 6.0%
GILD Gilliad Sciences 2.5%
GME Gamestop 5.0%
GOOG Google 6.0%
HANS Hansens Natural 4.0%
NTRI Nutri Systems 4.5%
PEP Pepsico 3.0%
SNDK Sandisk 2.75%
TIE Titanium Metals 2.5%
UNH United Health 4.5%
VCLK Valueclick 3.5%
WFMI Whole Foods Market 3.0%
CASH Interest Bearing Acct 28.5%

Managed Accounts Model Portfolio Tuesday Evening

2005-11-08T17:21:00.000-05:00

PORTFOLIO UPDATE:

Today the stock market finaly started to pull back from the nice gains it had achieved over the past couple of weeks. Last week I had added to our QQQQ short hedge and pared back some of our extended positions. Unfortunately, these defensive measures have not prevented us from giving back some of our gains.

Today we got zapped by bad news as CLHB failed to meet analysts expectations and broke down below support. I sold the position after it gapped down over 5 points - Ouch!

Fortunately ATCO had a great day today and more than made up for the CLHB debacle. ATCO's "LRAD" - Long Range acoustic Device - was used by a Seabourn cruise ship to ward off a pirate attack off the coast of Somalia this past weekend. As a result, ATCO has been getting lots of media attention. There is a good chance that LRADs may become standard equipment on all Commercial vessels, cruise ships and large private yachts.

Lastly, I took a small long position in VPHM today. Virapharma is one of America's fastest growing companies and reported great earnings growth yesterday. It is trading at an all time high.

MODEL PORTFOLIO:

AAPL Apple Computer 3.0%
ATCO American Technology 5.0%
CERN Cerner 4.0%
EWJ I Shares Japan ETF 4.75%
GILD Gilliad Sciences 2.5%
GME Gamestop 5.0%
GOOG Google 4.0%
HANS Hansens Natural 4.0%
NTRI Nutri Systems 4.5%
PEP Pepsico 3.0%
TIE Titanium Metals 2.5%
UNH United Health 4.5%
VCLK Valueclick 3.5%
VPHM Virapharma 2.25%
WFMI Whole Foods Market 3.0%
QQQQ Short Hedge Aggressive Accounts 35.0%
CASH Interest Bearing Acct 41.75%

Managed Accounts Model Portfolio Thursday Evening

2005-11-03T18:48:00.000-05:00

PORTFOLIO UPDATE:

The market rally continued today as the major averages reached overhead resistance levels. The market is now extended short term, but there are many institutional investors who have missed the boat and are hoping to get in on a pullback. Today was one of those days where bouts of profit taking were offset by investors scrambling to get long.

My strategy is to take profits on extended positions and to purchase only those stocks that are starting to make a move up. At the same time I have taken out a small QQQQ short position as a hedge for our aggressive accounts.

With this strategy in mind, I took partial profits in GOOG, TIE, UNH and WFMI. All of these positions are extended and I hope to reload if they pull back. Nothing says that they will pull back other than the law of averages, i.e., hogs get slaughtered. I also sold AAUK which spiked up and then broke back down below it's breakout point.

Finaly, I took an initial position in CLHB which broke out to a new high today. Clean Harbors does exactly what it's name says and is a prime beneficiary of the mess from all of the natural disasters that we've witnessed lately.

In short, I want to play some defense here and try to lock in some of the nice profits that we have just made. At the same time I still want to stay in the game.

MODEL PORTFOLIO:

AAPL Apple Computer 3.0%
ATCO American Technology 5.0%
CERN Cerner 4.0%
EWJ I Shares Japan ETF 4.75%
GILD Gilliad Sciences 2.5%
GME Gamestop 5.0%
GOOG Google 4.0%
HANS Hansens Natural 4.0%
NTRI Nutri Systems 4.5%
PEP Pepsico 3.0%
TIE Titanium Metals 2.5%
UNH United Health 4.5%
VCLK Valueclick 3.5%
WFMI Whole Foods Market 3.0%
QQQQ Short Hedge Aggressive Accounts 17.5%
CASH Interest Bearing Acct 44.0%

Managed Accounts Model Portfolio Wednesday Evening

2005-11-02T16:48:00.000-05:00

PORTFOLIO UPDATE: ROTATION

The market rally continued today and most of our accounts again made all time highs. This rally appears to have real legs, but discipline dictates that I sell or pare back extended positions. Therefore, I sold SNDK for a nice profit and I trimmed back our GOOG position to 6% of our portfolios. GOOG is up almost 80 points in the last 9 days.

The broadening out of the rally encouraged me to added three new positions to our portfolios today. I purchased GILD, one of the premier biotech stocks and a prime beneficiary of the spending to stop bird flu. I also purchased AAUK which might be in play as the gold mining industry undergoes a round of buyouts. Lastly, I purchased VCLK which had blow out earnings and broke out to a new high.

On a final note, HANS broke out to an all time high today and closed up a whopping 8.4 points. This morning Citibank gave Hansen a buy recommendation with a $72 price target and I added to our position.

MODEL PORTFOLIO:

AAPL Apple Computer 3.0%
AAUK Anglo American 3.0%
ATCO American Technology 5.0%
CERN Cerner 3.5%
EWJ I Shares Japan ETF 4.5%
GILD Gilliad Sciences 2.5%
GME Gamestop 5.0%
GOOG Google 6.0%
HANS Hansens Natural 4.0%
NTRI Nutri Systems 2.5%
PEP Pepsico 3.0%
TIE Titanium Metals 4.0%
UNH United Health 5.0%
VCLK Valueclick 3.5%
WFMI Whole Foods Market 5.5%
CASH Interest Bearing Acct 40.0%

Managed Accounts Model Portfolio Monday Evening

2005-10-31T18:49:00.000-05:00

PORTFOLIO UPDATE:

The market had another rousing rally today and most of our portfolios made all time highs. Tomorrow will probably be a different story as the market reacts to the negative after hours guidance from DELL and awaits the Federal Reserve's decision on interest rates.

The one transaction that I made today was the repurchase of HANS. Hansens is starting to act better after consolidating for over three months.

MODEL PORTFOLIO:

AAPL Apple Computer 3.0%
ATCO American Technology 5.0%
CERN Cerner 3.5%
EWJ I Shares Japan ETF 4.5%
GME Gamestop 5.0%
GOOG Google 9.0%
HANS Hansens Natural 2.5%
NTRI Nutri Systems 2.5%
PEP Pepsico 3.0%
SNDK Sandisk 5.0%
TIE Titanium Metals 4.0%
UNH United Health 5.0%
WFMI Whole Foods Market 5.5%
CASH Interest Bearing Acct 42.5%

Managed Accounts Model Portfolio Weekend Review

2005-10-31T09:13:00.000-05:00

PORTFOLIO UPDATE:

Friday the market came right back and roared past all of Thursday's losses. Friday's rally may be attributed to any of the following: The end of month portfolio markups by institutional investors; The end of the seasonal selling typical of September and October; The feeling that the news cycle can't get any worse for the the Bush administration because Harriet Meirs is out and no major indictments are forthcoming other than Scooter Libby's perjury charge.

On Friday I made an initial purchase of PEP which broke out to a new high. PepsiCo is one of the worlds greatest diversified food growth companies and should afford our portfolios some balance and stability as the economy slows.

Finaly, I paired back our AAPL position. There is nothing wrong with taking some profits on a very profitable position.

MODEL PORTFOLIO:

AAPL Apple Computer 3.0%
ATCO American Technology 5.0%
CERN Cerner 3.5%
EWJ I Shares Japan ETF 4.5%
GME Gamestop 5.0%
GOOG Google 9.0%
NTRI Nutri Systems 2.5%
PEP Pepsico 3.0%
SNDK Sandisk 5.0%
TIE Titanium Metals 4.0%
UNH United Health 5.0%
WFMI Whole Foods Market 5.5%
CASH Interest Bearing Acct 45.0%

Managed Accounts Model Portfolio Thursday Evening

2005-10-27T18:23:00.000-04:00

PORTFOLIO UPDATE:

Oy Vey, It's time to quote Michael Corleone again - "Just when I get out they pull me back in!" Just when the market finally appears to have bottomed they knock it back down. Today's ugly stock market sell off caught me by surprise. As a consequence I took defensive measures. Regardless of one's opinion there is no sense in arguing with the tape.

I sold BA which broke down on the charts after reporting OK earnings yesterday. The long term Boeing story is still intact but short term this market is brutal and I must reduce risk. With this in mind, I also sold DVY for a small gain.

As much as I would like to hold onto positions, my methodology calls for me to cut back when stocks break down or when the market sells off. During choppy markets this can lead to churning the portfolio.

MODEL PORTFOLIO:

AAPL Apple Computer 5.5%
ATCO American Technology 5.0%
CERN Cerner 3.5%
EWJ I Shares Japan ETF 4.5%
GME Gamestop 5.0%
GOOG Google 9.0%
NTRI Nutri Systems 2.5%
SNDK Sandisk 5.0%
TIE Titanium Metals 4.0%
UNH United Health 5.0%
WFMI Whole Foods Market 5.5%
CASH Interest Bearing Acct 45.5%

Managed Accounts Model Portfolio Wednesday Morning

2005-10-26T07:44:00.000-04:00

PORTFOLIO UPDATE:

Yesterday the market had a well deserved mild sell off. Hopefully, the market will continue to regroup and digest Monday's huge gains in an orderly fashion before heading higher.

GME had a great earnings report and hit an all time high. Gamestop now has the wind at its back and I increased our long position in the name.

I also added EWJ to our portfolios. The Japan I Shares ETF is a great way to play the turn around in Japan's economy and stock market. I have been waiting for a pullback as an entry point.

MODEL PORTFOLIO:

AAPL Apple Computer 5.5%
ATCO American Technology 5.0%
BA Boeing 5.5%
CERN Cerner 3.5%
DVY Dow Jones Dividend ETF 5.0%
EWJ I Shares Japan ETF 4.5%
GME Gamestop 5.0%
GOOG Google 9.0%
NTRI Nutri Systems 2.5%
SNDK Sandisk 5.0%
TIE Titanium Metals 4.0%
UNH United Health 5.0%
WFMI Whole Foods Market 5.5%
CASH Interest Bearing Acct 35.0%

Managed Accounts Model Portfolio Tuesday Morning

2005-10-25T08:08:00.000-04:00

PORTFOLIO UPDATE:

Yesterday the market staged a great broad based rally and our portfolios were up across the board. Several of our stocks, such as AAPL, GOOG, TIE & WFMI made all time highs.

In the morning I purchased SNDK which I had mentioned yesterday was a better alternative than PLAY. I also covered our MRK short for a small gain.

My sale of PLAY and the covering of the MRK short are good examples of technical analysis. Both stocks were not doing what they were supposed to be doing. Portal Player did not rally when Apple reported great earnings last week. Apple then broke out to a new high, but Portal Player fell even though it was allegedly a great beneficiary of Apple's success. Last night Portal Player released disappointing
earnings and the stock fell 4 points. We therefore avoided a disaster.

Merck is a similar case in point. Everyone knows about Merck's Vioxx problem yet the stock fails to really fall any further. The longer a stock takes to do what it is supposed to do, the greater the risk. Maybe Merck will still collapse, but the odds now tell me to avoid getting "rope a doped" by a holding that stubbornly refuses to fall any further.

MODEL PORTFOLIO:

AAPL Apple Computer 5.5%
ATCO American Technology 5.0%
BA Boeing 5.5%
CERN Cerner 3.5%
DVY Dow Jones Dividend ETF 5.0%
GME Gamestop 3.5%
GOOG Google 9.0%
NTRI Nutri Systems 2.5%
SNDK Sandisk 5.0%
TIE Titanium Metals 4.0%
UNH United Health 5.0%
WFMI Whole Foods Market 5.5%
CASH Interest Bearing Acct 41.0%

Managed Accounts Model Portfolio Weekend Review

2005-10-24T08:08:00.000-04:00

PORTFOLIO UPDATE:

Last week was very treacherous to say the least. It appeared that the market put in a bottom on Wednesday, only to be whacked back down on Thursday. Friday was a mixed bag, with the Dow selling off on bad CAT earnings and the rest of the market rising on the strength of GOOG.

On Friday I sold PLAY for a tiny loss and will reconsider it if it breaks out on the charts. In hindsight SNDK would have been the better play in that group.

I still believe that there is an excellent chance for the market to rally from here but as usual I will let the stocks tell me what to do. If more leadership stocks like AAPL and GOOG can continue to make new highs that will encourage me to add to our longs.

MODEL PORTFOLIO:

AAPL Apple Computer 5.5%
ATCO American Technology 5.0%
BA Boeing 5.5%
CERN Cerner 3.5%
DVY Dow Jones Dividend ETF 5.0%
GME Gamestop 3.5%
GOOG Google 9.0%
NTRI Nutri Systems 2.5%
TIE Titanium Metals 4.0%
UNH United Health 5.0%
WFMI Whole Foods Market 5.5%
CASH Interest Bearing Acct 46.0%
MRK Short Merck Aggressive Accounts 4.0%

Managed Accounts Model Portfolio Friday Morning

2005-10-21T04:44:00.000-04:00

PORTFOLIO UPDATE: GOOG to the rescue!

Thursday was one of the wildest days that I can remember. The market sold off and wiped out all of Wednesday's gains. The selling seemed to be a combination of options expiration sell programs and wholesale dumping of energy stocks. The forced liquidation of stocks may have been related to Refco's bankruptcy.

Our two highlights involved ECA and GOOG. On Wednesday Encana was rumored to be the object of a takeover at $65 per share. Encana's management refused to deny the rumor and the stock blasted off. Thursday was more of the same with printed articles confirming the buyout talks. Then the rug was pulled out from under us when Encana's management did a double take and denied any takeover talks. The stock quickly gave up all of its gains and we sold it after a round trip to nowhere.

GOOG came out with spectacular earnings after the close and ran up around 32 points to a new all time high after 4PM. I think that this is the beginning of the next leg up with $400 a reasonable target by year end. I added more GOOG to all of our accounts.

MODEL PORTFOLIO:

AAPL Apple Computer 5.5%
ATCO American Technology 5.0%
BA Boeing 5.5%
CERN Cerner 3.5%
DVY Dow Jones Dividend ETF 5.0%
GME Gamestop 3.5%
GOOG Google 9.0%
NTRI Nutri Systems 2.5%
PLAY Portal Player 2.5%
TIE Titanium Metals 4.0%
UNH United Health 5.0%
WFMI Whole Foods Market 5.5%
CASH Interest Bearing Acct 43.5%
MRK Short Merck Aggressive Accounts 4.0%

Managed Accounts Model Portfolio Wednesday Evening

2005-10-19T18:44:00.000-04:00

PORTFOLIO UPDATE:

After gapping down at the open and after much panic selling, the stock market had a huge broadbased reversal rally today. There is a good chance that my thesis about a market bottom could work out.

With this in mind, this morning I purchased DVY for all of our accounts. As our conservative accounts know, The Dow Jones Dividend ETF is a basket of 50 of the top S&P 500 dividend paying stocks. Not only do we get to participate in the stock market rally, but we get a safe diversified 3.75% dividend yield. Later in the day as the rally picked up steam, I added to our BA position. Boeing is near an all time high.

On a negative note, yesterday I quickly sold the MO position for a small loss. The stock acted very poorly after Monday's great day.

MODEL PORTFOLIO:

AAPL Apple Computer 5.5%
ATCO American Technology 5.0%
BA Boeing 5.5%
CERN Cerner 3.5%
DVY Dow Jones Dividend ETF 5.0%
GME Gamestop 3.5%
GOOG Google 6.0%
NTRI Nutri Systems 2.5%
PLAY Portal Player 2.5%
TIE Titanium Metals 4.0%
UNH United Health 5.0%
WFMI Whole Foods Market 5.5%
CASH Interest Bearing Acct 46.5%
MRK Short Merck Aggressive Accounts 4.0%

Managed Accounts Model Portfolio Tuesday Morning

2005-10-18T08:56:00.000-04:00

PORTFOLIO UPDATE:

Monday the market continued to rally and I added MO to our portfolios. Altria and the tobacco industry won a major US Supreme Court decision Yesterday. The decision set aside the bulk of the industry's potential liability to the various States.

As you can see in the above charts, the market is now at extreme oversold levels and investor sentiment is very pessimistic as per the CBOE put/call ratio. These readings are at levels where the market has bottomed in the past.

MODEL PORTFOLIO:

AAPL Apple Computer 4.0%
ATCO American Technology 5.0%
BA Boeing 3.0%
CERN Cerner 3.5%
GME Gamestop 3.5%
GOOG Google 6.0%
MO Altria 5.0%
NTRI Nutri Systems 2.5%
PLAY Portal Player 2.5%
TIE Titanium Metals 3.0%
UNH United Health 5.0%
WFMI Whole Foods Market 2.5%
CASH Interest Bearing Acct 54.5%
MRK Short Merck Aggressive Accounts 4.0%
DVY Dow Jones Dividend ETF Conservative Accounts 5.0%