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Hump Day Mail

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Triple digit returns?

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Editor's Note: Minyanville is a community of people who share an interest in fiscal literacy. As perspective is an important aspect of our daily routine, we share this exchange with hopes that it adds balance to your process.

Toddo,

A few things struck me about 'Ville content in the past few days. There's a lot of coverage given to the "usual suspects" in the tech area and their earnings reports. My question, though, is whether this is just an example of fighting the last war. Everyone was an expert in 1999 on things like book-to-bill ratio, chip components going into cell phones, dark fiber vs. light fiber, etc. And it seems like the 'Ville's coverage is still stuck on yesterday's battles. Does Micron or even Dell matter anymore? Who cares about a fungible chip or a commoditized box? Does anyone think they will double their money in tech in 2 or 3 years?

You can probably guess where I'm heading with this. Compared to the 'Ville's focus on the tech names, is there any attention being paid to XTO, CHK or EOG? I guess we'll know the market has shifted when everyone knows the current hedge positions of every E&P and when people can name the location of every refinery, its output, and whether it processes light or heavy crude. Bottom line: I think the 'Ville's coverage should be reflective of your big picture thinking that we're on the cusp of a big move into energy and metals (and that energy will have the biggest weighting in the S & P). It's not there yet.

Just my two cents,

Minyan John


MJ,

Thanks for the note. I would offer that tech data points "matter" as a function of how many people already own them. You won't get an argument from me that they're crowded and, in many cases, shadows of their former selves. Folks are conditioned to stick with familiar names-be it Crest toothpaste, Mobil gasoline or Levi's jeans. The same can be said of stocks and that mindset has trapped alotta traders (and investors) at higher levels.

The migration into energy and metals isn't a new thought, per se, as we've been discussing it in the 'Ville for a while. Perhaps we could have done a better job highlighting opportunities but there's a fine line between overt advice and shared learning. It's difficult to talk about specific situations without knowing the time horizon and risk profile of your audience. I've said it before and it bears repeating-to achieve a level of understanding necessary to make intelligent choices, being told what to do-without understanding how and why-often does more harm than good.

I wanna quickly touch on another point that I found interesting in your note-the basis of expectation. The bubble conditioned alotta people to believe that doubling their money every few years was par for the investment course. Profiting is a privilege-not a right-and double-digit returns (much less doubling your money) has become the exception rather than the rule. There are surely opportunities in select sectors and individual equities but it's gonna take some elbow grease to dig 'em out.

Perhaps I'm wrong-perhaps we're on the cusp of another "all encompassing" bull cycle that floats our boats with a rising tide. Some folks believe that we're gonna see triple digit gains in the years ahead and I suppose that's part of our probability spectrum. Brian Reynolds recently posed the question that if the GM debt crisis, terrorist attacks and two major hurricanes haven't dented the Minx, what will? It's food for thought as we digest the inputs, weigh the metrics and formulate a viable investment strategy.

For my part, and this is my personal choice, I want to preserve capital first and eye openings as they evolve. I may miss some trades and trends along the way but I continue to feel that proactive patience will serve me in good stead. I learned a long time ago that opportunities are easier to make up than losses and squeezing profits from a stone is the quickest way to get stuck between a rock and a hard place.

Anyway, sorry for floating off topic a bit but I thought these vibes should be shared. Good luck in the muck and thanks for spending your day with the critters.

R.P.

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