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Strategies & Market Trends : Value Investing

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To: Spekulatius who wrote (43742)	8/6/2011 10:45:50 AM
From: E_K_S	Read Replies (1) of 78717

I generally agree with you Clownbuck. I have been selling down my REIT preferred shares booking my gains from when I purchased them in the 2009 debt crash at a significant discount. I would rather hold the cash earning a negative rate of return than riding down these shares back to my original cost basis. Any new equities I have been buying must follow my general LT debt guidelines where annual net income must cover the long term debt w/i four years or less. I also only buy equities that own hard assets like oil and/or own a franchise that generate tons of free cash flow (ie pipe line companies w/ low debt) and/or significantly undervalued companies w/ very low PE and selling below book (definitely No financial companies). I was lucky to sell my only top 10 holding in a financial community bank (NYB)recently and I own only a stub position that has a very low cost basis. In fact I have been a net seller of stocks since March 2011 building up my cash reserves. I do not anticipate the extreme credit implosion like we experienced in 2008/2009 but those companies that have not deleveraged their balance sheet will be negatively impacted by higher interest rates and a slowing economy. I do think there will be some unique opportunities to pick up some undervalued assets as long as you have the cash and are willing to wait 18-24 months for values to begin to move higher. ------------------------------------------------------------------------------------------------------- How do you see the S&P downgrade in the U.S. credit rating playing out Monday and into the week/months ahead? Do you think Congress will get the message that they need to do something more substantial on the budget? After a brief negative reaction (this is the time you place your low ball GTC Willy bids in), I expect the Fed to announce a new QE3 program that should stabilize the markets. Eventually the survivors will be those company's will little or no debt that deliver "must have" products or services (food falls into that category). During the next several months/years, we will probably see more bankruptcies, fire side asset sales and a forced deleveraging by Mr. Market. Ironically, Treasuries will probably still be the save haven for idle cash. EKS

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