Commodities obviously continue to be "liquidated" by HAL 9000 and friends, so I need to take some actions to shore up the hemorrhaging. I've cut back the fertilizer quite a bit, and it remains my favorite theme so I don't want to cut much more. Note - I'm not buying because these stocks are in free fall and if PE of 10 why not PE of 5. Who knows where the selling ends.
I am going to instead cut some coal which is inane considering the price for coal (the actual commodity) stands like a fortress as compared to oil but since they are both black and hence HAL 9000 cannot discern between the two - they get sold off. I am hoping my capitulation marks the bottom. I am cutting back 2 names to the bone.
First, Massey Energy (MEE) - the stock has broken the 50 day moving average ($70) and seems like it has a date with destiny at the 200 day moving average ($50). It is in no man's land now in the $57s. So I'm going to take my ball and go home and take it down to a 0.3% stake.
Second, Walter Industries (WLT) - all things considered this stock is holding up. Why? Probably the homebuilding exposure - no, I'm serious. [May 1: Walter Industries - the Most Fascinating Company] Or perhaps there is some back office buyout deal in the works - we'll never know. But the question is, is it going to simply follow the path of Massey Energy or is this relative strength signaling something? Either way I am not going to stick around at this moment to find out - the stock broke its 50 day moving average in the low $90s and the 200 day moving average is ... in a galaxy far far away. I've taken it down to a 0.4% exposure.
One day, these stocks will act like broken homebuilders, retailers, financials, airlines, auto stocks - and make a huge bounce off an oversold level. And people will pile in and yell at us that this bounce signals the return of the global economic boom. We'll know its nothing more than HAL 9000 and his thousands of brothers across NYC/CT buying. But for now, it appears there is no end to the liquidation so we don't want to stand in front of the freight train any longer; we've already handed back a ton of unrealized gains.
I'm willing to sacrifice for the team - perhaps my selling marks the bottom. I am even reading coal bears (read: human beings) say enough is enough and they are covering but this is a new era. Valuation means nothing. Only hedge fund computers piling in and out matter. And they seem intent on getting out - at any cost. Humans are so 1990s.
Long Massey Energy, Walter Industries in fund; no personal position
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