Wednesday, October 10, 2007


After a few days in the mountains, I am running late. Just time for a brief comment.

The signs are clear that we are almost through the big turn. Aluminum prices tell the story. The roll over of commodity prices is underway, simultaneously with the take off of late cycle stocks.

A word of caution. I am also getting short term signals of speculative fever. The market is over bought, the bulls to bears has shot up, the NASDAQ volume has jumped relative to the NYSE volume and put call ratios have fallen. I will not try to sell anything in the hopes of buying it back at a lower price because I believe the stocks that will be hit the hardest are the ones I don't want to own even after any pull back.

There is definitely fever in some of the high tech areas. Some of these stocks will have to double sales several times over the next 10 years in order to justify current prices. I expect strong growth and strong competition in this area.

Yes, my favorite tech stock continues to be Google. I pounded the table in 2004 and bought all I could at 85. Of course, none of my readers were interested at the time. As the stock went up, accounts were opened and I bought the stock again and again at higher and higher prices. By 2005, a lot of new accounts were opened and it took a good while for the latest buyers to appreciate their purchase. With the stock now over $600 per share (a 7.2 bagger on my original purchase), it is still cheap relative to the "hot stuff".


CAL is now the most popular airline among the analyst. As a contrarian, I would normally feel very uncomfortable owning the most popular stock but the key point here is that institutional ownership is still 95% with 14% of the shares short. I suspect that a significant portion of the shorts are buy public speculators. It will take a number of years and a lot of publicity for a significant ownership to be distributed to the public. The current short squeeze is fun to watch. The short interest was at 18% not long ago. The stock is moving up while the institutional ownership remains fairly constant. A sentiment change could see the public only begin to buy shares heavily at twice the current price.

Family accounts remain "all in". GO, GO, GO!

Last chance to enter your guesstimate. What are the odds of the passage of a carbon tax to offset the Alternative Minimum Tax?