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2006-07-21 :: Lightning Strikes

Sorry to have been out of touch the last couple of days.  Lighning struck my house and fried my computer, where I typically blog.  I generally don’t have time to blog at the office, particulary now with the market jumping up and down as it has been the last couple of weeks.

Anyway, enough of my issues.  Let’s talk the markets.

We continue to raise cash, albeit slowly, as we see selling opportunitites, and add to selected energy positions that should take off one the market settles down.  Frontier Oil, Devon Energy, DrilQuip, Helix, Nabors and Noble are all great buys at current levels, and should be significantly higher a year from now.  Earnings are strong, and contrary to what many are saying, these historic cyclicals’ earnings aren’t going to crash as the economy slows.  As I’ve written ad nauseum, the supply/demand dynamics provide a support level that will keep their cash flow strong.

That can’t be said for tech stocks…if you are holding any in your portfolios and hoping that your EMC or Intel or Sun Micro will come back to pre-2000 levels, you will be very disappointed.  We are in the third leg of their secular bear market (something I wrote about in my periodic newsletter a year or so ago) and the third leg is generally a grinding down of stock prices to single digit P/E ratios.  The third leg takes years to complete – just witness the third leg of the energy and metals secular bear that last 20 + years or the Nikkei bear that lasted 17.  Find an  up day, and sell the stocks, move into an energy company trading at a 9 P/E with a 30% earnings growth rate…its not rocket science, but it will make you money.

The Israeli skirmish looks to grind on for a long time to come.  The more I read the more I’m convinced that the attack on Israel was a well planned event financed by Iran and Syria, with foreknowledge that Israel would react strongly to the hundreds of rockets and kidnappings of soldiers.  I don’t know where it will end, but it will likely end badly for the innocent people caught in the middle.

We will continue on enacting our plan to generate cash and overweight energy, to protect clients from the negative impact of this situation.

Have a great weekend!

Mark