Monday, February 23, 2009
(Cont'd from above)...

Jim (cont'd):   


Right now they are going down less than the rest of the market… you know we call that relative out performance… I also regard it to a prelude to money being actually made… that is called absolute returns… meaning that they will be going up more, when… and it is when not if… the market stabilizes… and you know that I don’t like this market… you know I don’t think it is done going down… but there can be a snap back… it is problematic to sell stocks right down here… there will be a better opportunity coming… now the best case for the stables has nothing to do with them specifically, hardly… remember last week when we played Survivor Wall Street… well, it looks more and more like the stables will have their Gloria Gainer moment and win… while virtually every other group gets kicked off the island… or to put it another way, the best case for these stocks is a simple process of elimination… while hardly anything else is working, these are the stocks that you go to… I do like gold… I like it more than stables, we have covered that over and over… we will cover it again tomorrow… but you can’t have a portfolio of just gold… as attractive as it is, you need some diversification… the foods and beverages are the last men and ladies standing… ladies because Pepsi is run by Cramer fave, Indra Nooyi.

So much money is flowing out of so many other sectors and it just has to go somewhere… that is the way money management works… even with so much cash flowing out of stocks in general, the money that is left has to go somewhere… and it is going here… I think a lot of the money that is being pulled out of other areas will be flowing right back into the stables… remember, if you are a mutual fund manager, you don’t have the luxury of being all in cash… you have to put the money that you are managing somewhere, or what the heck are they paying you for… so let’s tick from the other large areas that investors are fleeing from, so you can understand why they are left with the stables.

The financial… with all the misdirection from the government… it is down right embarrassing now, isn’t it… I mean you and I both know… it is simply impossible to figure out what the common stock is worth here… especially after the Citi Corp nonsense today… if you are a portfolio manager, it has made you want to sell this group endlessly… there is only two with no credit risk in the whole group, Visa and Mastercard, they too are places to go… there is just no way a responsible portfolio manager will start a new position in this group… now the fall like Brutus… like Julius Caesar… is not in the stocks but in himself, Treasury Secretary Tim Geithner… who has yet to realize the gravity of the situation… and come up with a real plan… instead likes to chat with reporters all day… hey, what do you think of this one, how about this one, why don’t you flow with this one… that is actually our Treasury Secretary speaking, or at least a modification of what I see happening… until he gets serious… if he can… the banks and insurers are going to keep looking like demolition sites.

The early cycle stocks have been wrecked by concerns about unemployment and the lack of credit… the end of the auto industry as we know it… has made things worse… and the lack of any substantive infrastructure spending in the stimulus package… I always like to put that in quotes… has done even more damage by turning the machinery and steel stocks into companies without catalysts or backers… the transports… yeah… you got it, no pulse… they have been destroyed… they go down practically every day… they have no sponsorship whatsoever… and the losses are happening so quickly that it is scaring the pants off of people… even these old Zania pants that I brought in because it was a little chilly today.

Retail… it is under a lot of pressure… it is under the most pressure that I have ever seen… balance sheets stretched beyond believe… it amazes me how many retailers simple feel like they are not going to make it… today’s downgrade of JC Penney’s by an analyst is emblematic of that after this big decline… you got some balance sheets from Haities... Macy’s, Limited… wow… the real estate investor trusts… they are in freefall… because they need financing to stay in business, and there is none to be had… even the best of them Simon Property’s in Vornado… seem to have no defense against this onslaught.

Tech… it is surrounded… the whole group… is under attack from a million sides and taking heavy casualties… when Hewlett Packard, the best of the best, tells us that things have slowed dramatically… and the semi-conductors industry puts out some semi-conductor equipment data that is so dismal it will take your breath away…. there is no way this group can rally.

Media… yeah joke… a lot of companies are in trouble because of a massive decline in advertising… I wouldn’t touch anything in the entire group except for Google… and even then if I were you I would wait until it dropped below $300... my beloved Philadelphia Enquirer, just entered bankruptcy… the Enquirer, the Philadelphia Daily News, where I won $1000 in the Philadelphia Phillies Home Run payoff in June 19, 1988... anyway, that is beside the point.

Even groups that were once thought to be totally solid.. .the kind of stocks that you owned during a recession, the utilities… they have become free fire zone… Stanford Bernstein put out a great piece last week, that talked about how many once strong utilities may need, indeed, to slash their dividends.

Health care… rocked… by the new Medicare rules, which have lay low companies like United Health and once considered to be safe Humina, the drug stocks still work… although I worry about a strong dollar… and bio-tech, you bet, Gilead… charitable trust owns it… my favorite, but even there the quick money, well, it is hard to make.

How about hard assets like oil… as with gold I like this group… but stay tuned after the break to hear more so you know which oils to trust… because all of them are going down, and going down hard… I like the ones with the yields.

So by process of elimination that leaves us with the consumer stables… a group that is benefiting from almost all of the things that are working against the other sectors… financing… rock solid balance sheets they don’t need no stinking financing… raw costs… all going in their favor… huge gains in margin beginning next quarter as revenues stay up, and raw costs come down… advertising costs… giant part of their business… coming down precipitously… and now negotiable… what is bad for media is great for the stables…. transporting their goods to the stores… much less costly, gasoline is cheap… even Campbell’s… mmm, mmm, my least favorite… even reported a decent quarter… that is why the stables are the survivors… when things clear up, and the market gets real oversold… as it should be later this week… for maybe an end of the month rally… as the uncertainty in pretty much every other sector, save gold and maybe oil, is off the charts… as fund managers sell virtually everything else… the stables are what they are buying.

Here is the bottom line…

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The Bottom Line!:     As everyone gives up on the idea that the economy can turn in 2009... and everyone is… I think the supermarket isles are the only place to hide… unless, of course, Angelina Jolie is out there shooting people ala wanted… then, otherwise you will be safe not sorry… they take their place right behind gold as a necessary component of your portfolio.

The worse the economy, the better the staples should do & don’t forget about gold...

[verbatim recap]

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Jim went on after this segment to take questions from callers, and responded with his comments...

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Q:    I had some Lehman bonds, and when Lehman went bankrupt, that pretty much wiped those out. Well, the dreaded “n” word was thrown around in the news today concerning Citi Bank. The “n” word being nationalization. Well, Jim, last week you said that if the banks were to be nationalized you said that the banks and the bonds would be destroyed, and I just wondered what you meant by that?

Jim:    Well, I think anybody who believes that you can have any of the entities connected with a bank whether it be the common stock, the preferreds that they have issued for capital, or the bonds that they have… the idea that nationalization would mean that pretty much everything is wiped out… now Tim Geithner, who happens to be our Treasury Secretary, has it within his power to say no, we are not going to wipe out the preferreds… but remember, he wiped out the preferreds for Fannie and Freddie… you mentioned Lehman Brothers, he wiped out all the bonds… they mercurial nature of Geithner and company makes it so that there is not certainty… which makes it so that I can’t get in front of this freight train… nationalization is an unmitigated disaster for this country… the people who talk about it tend to be academics who know nothing…. they just have no clue… they have never run a trading desk… they speak with some authority… their authority should be revoked… but tenure is a powerful, powerful weapon against reason.

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Q:    My question is on HSY, Hershey’s, you know they are doing good things right now, they are upping their dividend, costs are coming down, and I think in this tough economy they are a great play.

Jim:    Well, I am not going to disagree… I saw Mr. Wolf resign as a non-executive chairman, he happened to be a huge favorite of mine… they have really kind of insulated themselves out of Hershey… but the numbers are better than people think… point blank, I will tell you that Hershey is the kind of thing that I like here… and I was surprised that it has come all the way down again… that is precisely the kind of stock that I want to buy… along with gold… and along with oil now that oil has come down… yes, I am quoting everyone… I am bringing out Gloria Gainer… I have shelved the Notorious BIG for the moment… because I am adopting Kevin Rudolph and of course my friend, buddy, pal Little Wayne… and I am telling you staples are going to rock… the staples are going to rock… the fire… I would bring it.

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[verbatim recap]

[end of segment]

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