The only word that comes to mind after living through these last 2 trading days which have felt like a full week, is WOW.  Its been decades since we have had 9 consecutive losing days.  I hope we do not get to that ninth day tomorrow, but I would not be surprised if it happens.  Today was just bloody again.  The market as a whole was down solidly all day, but President Obama had a lot to do with the last 90 point sell off at the end of the trading day.  We have heard whispers of QE3 occurring.  Then Moody’s and S&P leave US on AAA rating even though put them on a negative watch and Moody’s specifically said no fiscal stimulus!  I found that amusing.

I said over the weekend that I felt it would be a very bumpy week, especially with the jobs report looming the whole way away on Friday.  I thought we would have gotten a bounce back of some sort one of these last two days.  We saw it in Monday’s pre-markets being up over 1% but quickly went to red not long after the open and has not looked back since.  It is these downswings where our priority becomes conserving capital instead of making capital.  Even in this down week and a half, my portfolio has held up well because of staying defensive and trying to stay ahead of the market.  I have been recommending the purchase of volatility for the best hedge.  But keeping safe high yielding long positions can also beat the market.  Bristol Myers was done 1.8% for the day, Annaly was down 14 cents, Enterprise Product Partners was down 3 pennies, while Altria somehow ended the day in the green.  My aggressive part of my defensive strategy is remaining short on sectors that I think will outperform the market on the downside, which are airlines and European banks.  This has also done well.  Delta and American were down 4.55% and 6.55% respectively.  Credit Suisse and Deutsche Bank both were down over 4.5%.  Unfortunately, I did not keep my short on OpenTable as its lost another 10 points in 2 days.  However, there numbers missed the quarter as I expected.  They are at a place where accelerated growth is difficult when you are dependent on the consumer.  The market has proven it will still pay for true growth.  GMCR, Google and SODA have been the high flyers that I have owned but Expedia, Amazon, and Apple are on that list as well and done extremely well prior to today.

If you are the type of investor that does not feel comfortable with using options, or even shorting the market then I would definitely not do it.  Remember a long position the most you can lose is 100%, the loss to the upside has an infinite possibility.  It is even more important to have the discipline to cut your losses on a short if you are wrong.  If you fall into that category of an investor, I would stay in a ton of cash right now.  Gold and Silver are back to being a hedge unlike it was yesterday, so can always buy GLD or SLV.  If we ever end this overreaction I would sell though as I feel they will pull back some.  Hold only high yielding names if you need to be in something and now would be the time to start to accumulate positions to the long side on stocks that have been overly punished.  Find one you like that just reported earnings in this last week and half and been knocked down further than they belong.  But I would not enter a position all in once.  Buy a quarter position and if we continue to go down add to that position.  One that I am looking at is Akamai.  They have been knocked from $30.50 to below $23 a share.  I just do not think that they can go to much lower.  I do not see any shortage of internet usage because of debt or defaulting countries.  Everyone will still be online everyday and that is how this company makes money.  Remember to listen to what is coming out of Washington right now also.  Government spending less will effect companies top and bottom lines.  I would avoid the defense contractor names and most healthcare names like the plague which normally would be considered safe plays.

The market is scary right now, we are experiencing another economic time in the global economy that we have never experienced before.  That puts fear into the markets.  You cannot be scared to get in and out fast.  But if that makes your blood pressure rise too much I would stay in cash and wait for the calmer times ahead.

Good Luck!

Cheers,

Vinny

 

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