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Angst Gives Way to Opportunity


Remember the past, but focus on the future.

The seventh anniversary of the 9-11 attacks couldn't have come at a better time. At a time when America is drowning in self pity and prepared to rip apart the fabric of the nation in order to balance scales we should pause and reflect. Things could be worse and while it's fashionable to say "this is the worst" it's ever been or compare these days to the Great Depression, the fact of the matter is it has been significantly worse many times in the history of the US.

If, indeed, this is a recession (at this point it really doesn't matter how we label this period-- it's tough) then it is the fifth in my lifetime and I hope to live through a few more, too. When America was attacked it galvanized the nation. Since then its unraveled pretty good to the point where I believe lack of unity is a greater threat than the credit/housing crisis.

Maybe we'll pause, but more than likely one of the most heinous crimes against the country will be used as a political backdrop in the race for the White House. But, there is a chance that the moment of silence before the opening bell could rekindle that positive spirit and that could linger in a manner that helps folks look past the next 24 hours of trading. This notion, by the way, has nothing to do with the market moving higher or lower. Instead, while we may be in this predicament in part due to arrogance, the latest swing all the way to the other end of the pendulum is for sure the wrong place to be. Woe is me. Of course it's easy to feel this way. To a large degree we are victims of our own success. A lot of young people haven't seen it this bad. A lot of older people have forgotten how bad it has been.

Nobody wants it to get worse but it probably will. The challenge is how we respond. We could overreact and do a lot of things looking for a quick fix. We could descend into an abyss of anger and envy and vengeance. Or we could ride it out and stick to the principles that made us great in the first place.

As for the stock market there is no doubt turmoil is the order of the day but where stocks are right now reflect the angst of the past more than the opportunities of the future. The road ahead is bumpy for sure but there is still a chance the market could swerve completely off the road to avoid potholes. In other words there are lumps we have to take. We know first hand I have a couple of clunkers right now but my team understands there are any number of fantastic places to make money.

Because of the pervasive fear and wild gyrations (more symptom of fear than cause) my firm is doing more, entering and exiting faster than normal. Still, I can see myself now pulling up two and three year charts and saying to myself: "man, what if we held that stock, wow." If you could buy a stock today at $28.00 and knew it would be $67.00 two years later, would you do it? Okay, too rhetorical. Still, my point is these opportunities are laying around in abundance. The catch, you ask? Riding the waves, hanging tough, believing in the fundamentals are all necessary tools. I'm personally so frustrated because the example I used was a stock my firm offered numerous times to subscribers.

Imclone (IMCL) received a takeover bid today that trumped an existing offer. The stock is up 140% over the last two years. Last year my firm recommended the stock twice on our Hotline service. The stock was featured on March 30, 2007 and September 21, 2007 and both times alerts were sent out to take profits. I always felt, however, this stock could move a lot higher. I was a believer but I also knew the history of the stock which has been so volatile in the past, Martha Stewart went to prison rather than ride it lower. Over the past two years IMCL shares suffered through swift pullbacks in excess of ten percent. In fact the larger pullbacks were 21%, 13%, 31%, 15%, 14% and 23%. A guy like Warren Buffett could hang tough but even the founder of the company wanted to ride the shares lower when he heard there would be disappointing news.

Investors sold a lot of stocks this week that will follow the path of Imclone and be gigantic wins down the road. Some were sold for gains but most were sold for losses.

Click to enlarge

By the time the dust settled yesterday the session seemed like a non-event, but so many things are brewing. The questions about the fate of financials remained unanswered. Actually, we finished the session with more questions than the day before.

Oil was lower despite production cuts at OPEC, larger inventory draw downs and more storm concerns. Now I'm hearing people talk about $75.00 crude oil in the most nonchalant and cavalier manner. Just like that we've gone from $200.00 oil being in the bag to another 25% decrease. I'm not so sure. Oil and energy stocks enjoyed strong sessions yesterday, bouncing off key support point and trading convincing volumes. The same scenario played out with precious metals. Gold was down 4.3% and silver 8.0% but mining stocks spiked much higher on big increases in volume.

The trepidation in the stock market is palpable. I see it everyday through my firm's subscribers, volume and indecision in the market. People simply don't want to invest or from their point of view--roll the dice. Word out of Vegas pointed to a dismal summer even with a slight month to month bump in July. The news crushed casino stocks, even those with access to Chinese gamblers.

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No positions in stocks mentioned.
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