Follow The Money

We knew the fed had to act and act with boldness. The record short interest outstanding and almost record emotional low reached yesterday probably allowed the stock market to breathe again for the time being....so much of the investment game is based on sentiment....

Valuations for the "too big to fail and stopped going down" crowd prevailed today....we bought some UBS and added to FCX yesterday.

MAC, or material adverse change is a clause used to walk away from financial deals. This was out of control and something had to snap the log jam...forced mark downs of certain securities and frozen markets usually are relieved when you get a big volume day reversal and some signs of leadership....like what the Feds did today. The number of hedge funds and private equity firms reaching a breaking point when not being able to borrow against treasuries or municipals was extraordinary the past couple of weeks....as debt is paid down, retired, rescheduled and repriced we now have a new market forming...interesting that politics, Iraq and global warming seem like old topics for now.

The problem yet discussed are the enormous losses not yet realized by the nations endowments and pension funds....their losses will be matched by those well published numbers by their counter parties at the banks and broker dealers....it will be a long spring and summer for all the directors and trustees to work through their new budgets with less income and assets to invest.

To "beat the market", you must find stocks that are too cheap. To do this, you must look at the stock not as a security but as a share in a company, which is, in turn, a bundle of income producing assets. With confidence in this valuation and a margin of safety you can rationally attempt to beat the market. This is impossible with a broadly diversified portfolio. But a more narrow one with concentrated investments focused on a correct theme and trend is the formula for success as laid out by Benjamin Graham, the father of value investing....and followed by Warren Buffet.

Scarcity of oil, water, food, nat gas, coal, copper and maybe a banker or two well positioned will make you money...these sure seem like logical trends to us!

Danny Boy seen here is ready for spring break.