Macro Economic Trends and Risks
Catching the Right Train

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By Woolybooger1
November 10, 2008

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A Practical Assessment........

Hello Board Members,

Sorry, no Cat Fight, Politics or Pot stirring with this Post

As we move into the last couple of months of the Calendar of 2008 I figured it might be helpful even if just for one little Wooly to sit down and put some thoughts together. I do so for selfish reasons, but also to add to this Board what I have....... Little as that may be at times. I find posts like these get the smart folks to respond and poke holes in the way I am thinking. This is one of the best boards (if not the best) to hear several points of view that are well thought out. It is nice we do not have to agree in order to share.

(1) Year end Buying or Selling

Most of us are well aware that individual stocks move not in relation to if Wooly bought 100 shares, but in response to Mutual Funds buying or selling "Lots O' Stock". There I said it...... Wooly's shares really don't move the Market. That's okay, I just want to ride the right train. I do not want to stand at the end of the tunnel with my thumb up my ......... well you know........ and ask what is that light at the end down there. Sure is getting bigger and brighter. So we have to ask ourselves. Are Mutual funds buying up boatloads of anything at this point? Is GE such a good buy here that we should be on that train? How about MRK or PFE? Probably no one is buying Banks, but maybe, just maybe they should be. The ones that remain obviously, but will they be doing what Wells Fargo just did? Wooly's shares get diluted enough, he isn't sure the stock price will increase anytime soon if they get watered down more. How about Oil stocks? Is demand going to decline so much in recessionary times that drilling for oil is no longer profitable? How about those who ship Oil? NAT-Nordic American Tanker Shipping Ltd. We have discussed Peak oil enough to know it is a fact, but how long until the power of pricing returns to XOM, COP, etc....

(2) Tax Loss Selling

This is one that is hard for me to grasp. While on the one hand we all know that this occurs, it seems there has been so much selling that this really will not play a big role from this point forward. More than likely we will see losses that have been held on to will be maximized for this year's tax returns and a fair amount will be carried over to the next year or two. Probably not a big factor then huh?

(3) Selling before Capital Gains tax goes up

I wondered if this was going to figure into anyone's thinking. Is there any real chance that long term capital gains increases as well as other tax increases that have been discussed would prompt some to cash in during 2008 rather than wait for any changes that occurred in 2009 under new administration and congressional actions? Again as a little Wooly, I don't see that happening to me, but with larger corporations, people with substantially more wealth this could be an issue.

(4) Sector Rotations that are on the Rise

Often times we see cyclic areas that come and go during the calendar and fiscal year that move stocks such as the chip sector, retailers around Christmas, Oil prices around summer and the Holidays, etc..... I have just never invested that way so I wondered. Christmas aint looking too good this year for the 6.5% of Americans without a job, so I don't see any of those Consumer spending companies shouting from the rooftops between now and when the final results are tallied in January 2009. Still, if someone has a sector that is really looking strong, just throw out a shout for me please.

(5) Further unwinding of assets to avoid bankruptcy

This is so far out of my league that I hesitated to put it up here. I have no idea about this because the Government continues to step in and change the rules. Will GM, Ford, Chrysler or any related part supplier, financier, etc........ go under and the ripple effect will topple others? If this does happen will it be Market moving in general or sector specific? As Banks continue to close albeit in small numbers, and companies continue to close doors to many of their outlets, we see the affects in the REIT Market and this further depletes the bottom lines of Banks, and investment groups that have stakes in such enterprises. It also further devalues the surrounding properties and the snowball keeps getting larger at this point. Sure at some time the tide will turn ,to mix metaphors, but I do not see that happening at the present.

(6) Fear, Confidence, or Ambivalence

Of course we all know that this is what moves Markets beyond the obvious affects of numbers good or bad. As we reflect back on 2008 we need to be truthful with ourselves. We don't have to share with anyone else when we do this. After we evaluate how our investing choices have panned out looking backwards, we must be brutally honest going forwards. Are there any companies that we have tremendous confidence in right now? If nor right now, then maybe in the near future. If not in the near future then maybe we fall into the last category of Ambivalent.

We have several options based not only on what whether we have Fear or Confidence, but also if we are seeing those emotions working themselves through the Market right now. It is very interesting that in today's investing world we can have Confidence in our choices, but use the Fear in the Market to make our choices for how we invest. If we are Confident that the Market will move higher (based on what is the tough question) then we can use the fear of those who feel they will be left behind to drive the prices higher. On the other hand if we are Confident the Market will move lower, we use reverse ETF's or short companies based on the Fear in others who sell their shares.

Final Assessment

Well, that's a real bugaboo! Not much looks good, but we can come up with lots of "Catch Phrases" to gloss over our uncertainty.

It's always calmest before the storm!
It's always darkest before the dawn!

It's never too late to say your sorry!
Love is never having to say your sorry!

What goes up, must come down!
Been down so long this look like up to me!

Okay............ enough silliness..........

Wooly is 100% Cash, so no agenda here. Remember Wooly don't move the Market. I was just hoping to catch the right Train.

Everyone have a nice weekend............... off to make rounds.