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Warren Buffett Still Showing How It's Done


CEO's letter a model of what to say when you lose.


Greetings from New York, where, for the first time in recent months, the stench of fear is beginning to waft into my marketplace. Good traders enjoy the smell of fear the way Duvall's Colonel Kilgore enjoyed the smell of napalm in the morning. They smell like victory.

Support is busted, the enemy has broken through the lines, and the perma-bulls are getting fragged. Your choices are clear: You can tuck your knees to your chest and weep like Matt Damon in Saving Private Ryan, you can confuse machismo with suicide and expend your buying powder in one frantic spree - or you can pick your shots, set your stops, and take the time to smell the opportunity.

Here's what I'm doing as I get ready to surf to NYC early:

  • Remember the purple crayon of support at 740? Dead. Had I any squash I would have stuck to my inherent disbelief in triple bottoms.

  • Individual stocks are setting up for decent trading shots. I've taken a taste of Goldman Sachs (GS) with a stop just below 85, Mosaic (MOS) with a $35 Maginot line, and I'm watching Toyota (TM) getting ready to crash-test dummy into $60.

  • Prof. Coops taught me "it's not the news, it's the reaction." I've known AIG (AIG) was going to be a horror show for a week (and only the truly foolish-hopeful thought AIG could be even decent prior to that). Today's open would be called a "bad" reaction to the news.

  • And, yes, I'm both emboldened and covered in glitter by my dangerously long-standing relationship with the SDS double-short ETF. What can I say? It's going to end terribly - but knowing that makes disappointment impossible. I'll trade a few $20 bills and a vaguely dirty feeling for some good 80s hair rock and the smell of baby powder any day.

    Besides, I'm a month from 40 and could use the testosterone boost; better this than the won-ton shrivelling junk the baseball players inject.

  • How do you write a shareholder letter when you lose?

    See Berkshire Hathaway's (BRK-A) 2008 letter. If you read it closely, you'll note he a) admits to his own mistakes and b) doesn't spend a great deal of timing whining about naked short selling. After making those notes, you may resume inexplicable defenses of the decidedly remorseless Eddie Lampert in response to my last column.

With that I'm off to NYC early. I'm doing the Closing Bell, and want to be able to trade the close. Where do I think that close will be? Well, rich people are both vilified and terrified, dip buyers are simply poor, and brokers telling folks they've got to stay in "for the long haul" would be wise not to call my house.

Let's just say I'm putting stops below anything I'm buying.

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Positions GS, MOS, TM, SDS

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