Thursday, August 16, 2007


It now appears that the all-important rate cute that the bulls have been clamoring for will not come. This doesn't bode well for the market right now. It seems every day we are seeing another credit or mortgage related issue. Today it is Countrywide (CFC). I think the real thing driving the markets is hedge funds being forced to sell their shares to come up with cash for redemptions. In this uncertain market, I'm sure a lot of hedge fund investors want their cash.

I'd say most likely, within the next week, we could see a short term reversal. This is because certain sectors that have strength have gotten a little oversold. But beyond that, I still think we're headed for lots of volatility, with the potential to trade even further down.

I'm still in a pretty defensive stance. I've added lots of short ETF's to the portfolio. A couple of the portfolio holdings got a bump yesterday when Warren Buffett disclosed owning them. Bank of America (BAC), US Bank (USB), and Wellpoint (WLP) are the names involved.

As a side note, if you've got the guts, there are some major discounts out there. Countrywide (CFC), is a quality mortgage company trading way down. Etrade (ETFC) has also been taken down hard due to its sub-prime exposure. I don't recommend jumping into these names, but they are definitely trading at attractive valuations.

I'll try to update the portfolio later today.

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