Bounce-a-roo

Yesterday's US stock market bounce-a-roo was more like a superball bouncing, not merely the plain tennis ball bounce. Since last week's drop was a panic of the hedge funds of the rich, likely there were no real sellers left at low prices, so real buyers were able to move prices much higher readily. And I presume those surviving hedge funds with the ability to think rationally bought, too.

Among the real buyers was my Alpha Fund and Mrs. B's Sky Fund. Once the morning highs held and were broken upwards, I added to the Alpha Fund holdings that were still at good prices, moving to 150% long. Adds were to CVX, DVN, RIG, FCX, BHP, JOYG, EXM, DRYS, GNK, EDU. I did not add to AAPL, GOOG, and JPM as those were either no longer cheap or about flat with my last buy. I did not add to MBI as I have enough of that high risk, high reward speculation.

Mrs. B added to many stocks in her Sky Fund: a few consumer stables, some industrials, HBC, and a few other of her eclectic stocks. Stocks that appeared cheap on the weekly charts with good dividends and low PEs were selected for additional funds - this is all new cash being deployed. We together remarked on how many quality companies offered dividends over 3% and PEs around 10x, which are screaming buys in our thinking.

So now we wait. The details of the Treasury's plan are to be announced this morning. Since this whole mess is a "simple" panic of the rich, the principal problems can be cured rather quickly. What we do not know is the damage these huge pools of money have caused in their stampede. That will take some time.

But stocks prices are very low. In my humble opinion, too low. Home prices have bottomed except in the sun & surf areas and second home areas of the US, viz. mostly CA, NV, AZ and FL. Some McMansion areas suffer, too.

I have no problem with a second Federal stimulus which provides real stimulus, but not a pork bill with lard. Why not just give homeowners a break somehow, or small business, or provide some cash for Christmas ?

Treasury inflation protected securities ["TIPs"] are at very low prices, as the public flops from psychotic fear of inflation to deflation talk. I intend to re-build this long term holding in my Krypto Fund over time. It's remarkable that those prices moved about 20% in just about eight months. In the past the charts of TIPs looked like flatlines. I do not fear inflation for the next few years, but pricing 0% inflation for a decade is too extreme and demands a long term buy with new cash.

PS: So far I like what Paulson is doing with the TARP. More later. I like his flexibility.

Word of the Day

"Ineffable" - adjective [$10]
Ineffable means 1. unutterable; too great for description in words; 2. that must not be uttered.
Sentence: After being ineffable for decades, talk of possible Depression and comparisons to the Great Depression are now commonplace.