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Year-End Portfolio Cleaning


Keeping the trading bat shouldered for now.


Greetings from New York where I'm this close to closing up the trading shop and calling it a year. Though the tape, ironically, has no actual finish line I still measure everything by the calendar year. It's a legacy from once running other people's money (OPM), when it's all about results for the year.

Right now I've got a portfolio full of cash, dribs and drabs. I've stubbed my toe more than once but have double digit gains in a year when "flat" wins. I've been sidelined through the Friday-Monday rippage and, frankly, I'm having a hard time caring. Last year I closed up shop when the Fed gave us what, in retrospect, was one of the all time Selling Opportunities on December 11th and 12th. It's worth noting that what made it a sell signal was that the Fed did a liquidity jam job on the 12th after the market reacted poorly to the results the FMOC's regular meeting the day prior. The market traded in what was regarded as a shocking 3% range that icy December Wednesday, with the S&P 500 closing at 1,486 and it was enough to make me back off and head home for the holidays.

That's right, folks. For those of you with faith in the Fed's ability to decide just what can and cannot be "allowed to fail", the market is down over 40% in the 11.5 months since what has now become regular daily manipulations and liquidity jams. I get daily e-mails telling me I'm too cynical and generally surly. The truth is, I'm not enough of either. I've had a good enough year that I'm done putting "real" capital in play until 2009. I'm truly thankful for that and the embarrassment of riches that is my life. Regardless, if I'd been cynical enough to really put the pedal to the metal on my "Shenanigans" call of December, 2007 and just gone 100% short and had the squash to stick to the call, I'd be up a cool 43%.

Is the Fed pronouncing Citigroup (C) "too big to fail" bullish? Maybe for a trade. For an investment, the Fed has been trying to dig out Citigroup since at least August of last year. The stock is down more than 80% since the FOMC's "liquidity Boost Wednesday" on December 12th of ought-7. Mr. Market and the decisions of management decide which companies live and which ones die. The Fed, in all its branches and using only the best of intentions, can delay the day of reckoning. At best.

The existing and incoming government's fervent conviction that they can "save" industries and "create jobs" through wild spending and force of will has me thinking the balance of '08 is edgeless. Yup, I've actually stopped working in response to the government's insistence that they can make me do so. As I understand it, I am the personification of the general nature of all socialist movements. But that's a story for anther post.

For now, I've got my trading bat largely on my shoulder, even as I mentally toy with the idea of a short of the S&P 500 with an 860 closing stop. The days are short, the year is aging and "playing not to lose" is the path to a certain butt-kicking, regardless of your endeavor. Short of a thunder-bolt of inspiration, my trades will be a tenth their normal size from here until January. I wouldn't trade at all if I didn't need to stay loose and have a ton of air and type to fill on a daily basis.

Here's what I'm watching, for those of you looking from trading ideas from the openly apathetic:

  • Biggest regret of 2008, beyond ever looking at Microsoft's (MSFT) balance sheet? That I'm now long Citigroup, American International (AIG) and -- most maddening of all -- am about to buy into the Big 2.5 automakers, all thanks to the spendthrift ways of my elected officials. Think it's not "Patriotic" to have a problem with government bailouts? Thomas Jefferson said "the tree of liberty must be refreshed from time to time with the blood of patriots and tyrants". Does that sound like a guy who'd get squeamish about letting companies die from their self-inflicted wounds?

  • Trade I'm happiest about in 2008? Selling the USO for a $4 loss at $105. Todd-O talks smack about being on the other side of my long position in the first place. He was right, I was wrong. Any chucklehead can buy stocks. If you want to last beyond the trend du jour, you have to learn how to get out of positions. I stand firmly behind the purple crayon technique.

  • The network has asked politely that I not share my semi-retirement for the balance of 2008. In response I politely pitched the idea of dedicating a full block of Squawk Box this Friday to a Banjo Jamboree. I'll be hosting with the lovely and extremely able Becky Quick, who has offered that she can play the spoons "but not very well". Since I don't plan to start learning the banjo until tomorrow, I assured her she'd have nothing to be embarrassed about, quality wise.

  • How do you connect the dots between "taking the rest of the year off" and "working the day after Thanksgiving"? With a house full of in-laws, Minyans.

  • A longtime friend and Minyan just pinged me to let me know he's taking the other side of what's left of my Wal-Mart (WMT) long. He says he's convinced Lee Scott's exit and the predictably horrid holiday season will lead to multiple contraction. I responded that Wal-Mart is an investment, not a trade, and will be as long as I consider them perfectly positioned and a preeminent operator. Then I kicked into a little Foggy Mountain Breakdown. Who else am I staying long into my hibernation? McDonald's (MCD) and the aforementioned, accursed, Microsoft. One's perfect for a recession and falling gas prices. The other satisfies my desire for self-abuse and hunger for something to rue.

  • Finally, an anecdote which seems as meaningful as Joe Kennedy's famous (if apocryphal) tale of selling before the '29 Crash after getting a stock tip from the kid shining his shoes: I was running errands this morning and got to talking to my deli guy. He knows me from the show, and my deli shopping. We often chat markets. He was more terse than usual today. "Your whole stock thing is crooked" he said with disdain, handing me a pound of turkey. And he's right. But I'll worry more about that next year.
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Positions in WMT, MCD, MSFT

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