Brief delay to weekly update

I am off to a wedding this weekend and won't be near the computer.
Bottom line - we got hit hard this week. I think we could drift even lower but there will be some rebounding in the next month.

Remember - this is about the market and not the stocks.

As for holdings
Upside - I'm hoping for some TIE/TRID power shortly. When that occurs, I will probably sell some/all
Downside - Not happy with IMA's situation (not just the miss but the fact that it can't be an acquisition by P&G - as I hoped a- because of a liquidity crunch.

My next moves

I've watched far too long as prices have dropped because fund managers need capital to cover margin calls.
I don't see this ending for a while and I don't want to sell stocks that I think are selling off for market reasons (as opposed to fundamentals)

So I hope to make money on TRID following their call Monday. If that plays out well, we will the ability to sell some holdings and increase our positions in some stocks that are getting temporarily hit.

Selling OCN, buying TRID

OCN is clearly a broken stock. I'm leaving.
Selling 200 shares at $9.27

Buying 1000 shares TRID at $15.

Some quick stock updates

ESV - Continues to slide. Mainly due to concerns that there won't be a near term acquisition.
------------
PWR - reports in line and guides for next quarter to be inline. In which case I think that they are slowing.
---------
TRID - Announced earnings release next week. january $20 calls are $0.70
--------------------

IMA - Big miss. They are having digestion problems from the acquisition. Frankly, I had expected their tie up with P&G to be driving business faster.

---------
CTSH Had a big quarter and raised guidance

Flight Away From Quality

Yesterday saw a quality stocks dive.
My take is that many stocks,including quite a few of ours, have had an impressive run. Many funds cashed out of these stocks precisely because they can lock in some good returns.

Again, this goes back to my main contention that we won't go consistently Bullish until the credit crunch on the funds' part is resolved.

TIE, TRID, & KSU

TIE
Another titanium producer - RTI - announced last night that titanium prices rose 4% from the previous quarter. they had their own unique problems and missed earnings, but overall the message is strong titanium.

----------------
TRID
Now below $15. No buyers until the options issue gets cleared up.

-----------------
KSU
The reasons for a long term position in KSU are:
1. Price competitive vs trucks (gas prices are trending up not down)
2. The Mexican port
But right now, they aren't showing accelerating growth, so we need to wait. Buy if they hit $30

Steady

I think we will drift for another few weeks and then bounce up.

The issue remains strong fundamentals and weakness among institutions.
Should we sell? Potentially another 5% loss is possible, so you might consider buying put.
I will be selling a few stocks after some more review and usingthe cash to firm up existing positions. That is, I'll take a loss of OCN and UCTT (maybe) and take the ~$25K and buy more of the global infrastructure stocks (we need a shipping company).

Another day, Another 300 point swing

After shooting up 140 points, the Dow fell 146 points (the NASDAQ had an even bigger swing, moving up 1% and then down 1.4%)

Instead of "14,000 I hardly knew you" it is turning into "13,000 I hardly knew you"

I am now feeling more confident in my assessment that many deals are being postponed because financing terms are changing. That takes the air out of stock price increases.

But the liquidity issues have yet to be addressed. Every day we seem to read about home builders and lenders writing off ~$1B in business. Today:
* IndyMac announced that they had to buyback $218M in non-performing loans while its non-performing loans hit $500M+. BTW, IndyMac specializes in Alt-A, which is higher quality than subprime.
* Sowood Capital, a hedge fund, announced that it lost 50% of its $3B fund. It had to sell at a loss to meet margin calls
* MGIC announced that $1B in subprime mortgages are worthless
* GMAC announced a $254M loss. They also revealed that subprime lending fell from $6B last year to $700M this year.
* For all lenders, delinquent loans jumped from 0.5% last year to 1.1% this year.

In 1 day we have announcements of $3B of loans being made worthless and $5B in loans not being written. That's a lot of liquidity that suddenly disappeared.

And it isn't stopping.

Given that hedge funds spread their investments around and in the stock market, any margin call is negative for the market overall. And that is what is happening - funds are unwinding positions in fire sale mode. This will take at least this quarter and possibly the next to resolve.

Stocks shrug off last week's drop

I must say that I am a bit surprised that the market continues to move up strongly for a second day. I like it, but I am surprised.

As usual, folks are looking for reasons. Take your pick:
* continued strong earnings releases and guidance
* stronger consumer confidence
* CPI dropped to 1.9% from 2% in May

But what about slowing consumer spending in June? The slowest rise in a year.

More importantly, similar good news was released last week and it didn't matter. So I think the rise and drop are unrelated to fundamentals like health of the economy. I contine to believe that it was caused by an abrupt shift in liquidity.

If I'm correct, then only a shift in liquidity will change that scenario. And I don't see that shift happening yet. so I feel like this is more of a trading response to perceived oversold conditions.

HOLX slams earnings

HOLX reported
* Sales up 60%, edging sales slightly.
* Income up 100%. That beats estimates by 5% and beat the highest estimate

Looking closely at HOLX, you will note that last year they have a loss for one quarter. As a result, the trailing 12 month EPS is $1.15. Move forward 1 more quarter and that loss disappears and EPS will be $1.63
So today's P/E is ~47
Next quarter it will drop to 35

At the same time, growth is around 100%. They still feel cheap.

OCN releases strong results

OCN reported today:
* Sales was up 11% year over year
* Earnings more than doubled from Q1 to Q2 and rose 100% over last year (excluding a one time tax gain). This was due to a sale of loans.
* OPEX rose at a slower rate than sales
* Loans serviced rose 15% year over year to $53B

I do not see the surge in service demand that I expected to see as foreclosure activity has heated up. I'll listen to the conference call and learn more.

Fundamentally, however, they have a P/E of 3 even though they are growing much faster

Tough Week Ahead

I don't think the market will rebound this week. Great news may be forthcoming, but I think the money will trickle back.

Too much fear and nervousness