Thursday, October 2, 2008

Agriculture Nightmare

The agriculture stocks got SLAMMED today. Today was an awful day on the Street. The credit crisis is very real and it is showing up with each report. The ag names were slammed on the fears that the credit crisis would prevent farmers from obtaining the credit necessary for their normal business activities. I think this will result in the passage of the bailout bill by the House sometime before Monday morning. I don't like it, but IT HAS TO BE DONE. We have to get the credit markets going again. It will take some time for the effects of the action to be felt and the small businessperson is seeing their credit shrink and get more expensive with each passing day.

Do I think the ag stocks got overdone to the downside? Yes. Is now the time to pull the trigger and buy some of them? It depends on this bailout. If we see the credit markets improve---I think you will see a nice rally in some of these stocks. My favorite in the space is Compass Minerals (CMP). This company has been very well run and has been successfully passing on price increases to their customers. Barring a credit boondoggle----their success should continue for quite some time.

Now I must admit my oil and natural gas plays got totally slammed today. I was so shocked by the action in FLR that I just did nothing. It was well below my stop---and I just did nothing. I cannot believe that a company that is less than one quarter removed from announcing record profits, record revenues, and record backlogs has lost about 50% of its value. DO,RIG, and XTO all got smacked around as investors seemed to say DEMAND DESTRUCTION IS REAL. I had several experts tell me that inflation was only a monetary phenomenon and demand destruction would not hold off inflation. THAT IS NOT NECESSARILY TRUE----AT LEAST IN THE SHORT RUN. I have the declining value portfolio to prove it. I do think that now is an extraordinary time. Today looked like a FORCED LIQUIDATION DAY. Oil was down, Gold was down, stocks of all types were down, and the dollar was up. It looks like we have a lot of fear in the markets and it further looks like nobody is buying the BUFFETT BOTTOM. I think we are in for a wild ride until the election on November 4th.

I am seeing strength in the banks. BAC and JPM fared much better than the rest of the market today. With oil declining we should see some of the trucking firms JBHT, LSTR and others join the party. I have said time and again if we can get the financials to lead us---we can get out of this mess. I am never happy to not have an idea to play, but today the best idea I had was to just sit tight and conserve capital for a better day. I may be bored between now and the election, but I have pledged to quit making dumb mistakes by feeling like I absolutely have to be in a trade.

I do have faith in America and I definitely think that we are still the dominant economy. We will get through this---it just isn't going to be a very fun ride!!!

Good night and God Bless!!!

4 comments:

Dollar.Discipline said...

I feel that Buffett is like everyone else. He cannot possibly KNOW if we are at the bottom or not.

However, I do believe that he has looked at values and numbers that most people in the short run never look at. I believe he knows when a company will be profitable (based on numbers) and when one is set for a serious correction or failure.

I bought some AIG and some Goldman Sachs. Both are significantly up from where I bought them. Some of this is just bottom feeders that are ready to turn and burn as soon as they make x % profit. I plan to hold these for years.

I see he bought $3 Billion of GE with the option to buy $3 Billion more. Man, Ge is like a mutual fund all to itself. It's due to rise OVER TIME but not necessarily overnight.

Truth is, no one KNOWS anything anymore in these irrational markets.

captain caveman said...

Is this the same dollar discipline that was posting here last week? The one that was worried about "look out below"?

Did my posts convince you to buy those stocks? I hope I talked some sense into your head.
Goldman was a good buy. Congratulations dollar.

ourguini said...

You morons need to understand that we are headed into socialism. Do you understand what this government buyup of private assets means?

Short it all. Capitalism is through and Socialism is here.

the tax man said...

here is the real deal

government debt is good. economies do well when the government is heavily levered with debt. go look it up in your history books and you will see that our economy has prospered when we had high debt relative to GDP. the key is we can't raise taxes to pay off the debt. if we just keep plugging away with low taxes, this will ultimately be the greatest time in our history for our economy. don't worry about a crash, don't worry about inflation, just worry about tax increases. if we have the good sense to hold taxes low, this economic engine will begin to humm.