Risk aversion

'Danger Will Rogers'

while i can't remember where this saying came from it sums up what i think of the markets right now and short term.

An excerpt of a recent email i sent to a friend for your amusment:

>>>>>
Wow that was funny. Its nice when you pay for subscriptions to things that people don't know answers too! He does have some good points, but at least he admitted nobody really knows what the market will do. I agree with most of what he said. Part of the reason i haven't bought into the 'all commodities' portfolio was because of what he said. Too many fools on margin bidding it up too high and then forced into selling.



I adapted my 'sell down to the sleep level' a few years ago. While i still may use small bits of leverage here and there with my margin account or using the dreaded derivates in small doses. I have foolishly not followed my own advice to myself last summer and start buying some puts here and there. My account has been 30%+ cash for all of '08 and as the markets drift down i haven't bought a call option in months. I in fact love the possibilities of derivates (both long and short)... if used correctly and in moderation. Who knew?



I am really shaking my head on U stocks far more than any other commodity. Ag's are still high, golds so so, silver is better, but U's have been slaughtered and are probably the most useful of the bunch. The U price has been stable too; unlike gold, oil, corn, whatever, etc. As forced selling continues i still like buying railways, and JNJ or Proctor Gamble style companies over gold/silver (for the most part and long term).



I have to wonder how much more US financials and companies will fall before they enter the bargin bin or the Fannie/Freddie sin bin. Is AIG heading down the same Goldman Sachs road? I have tried to find 'the best' US financials and only 2 so far make me modestly comfortable: BBT and WFC. I think as BAC buys more companies it may be hurt as the unwinding continues.. '
<<<<<<<<<<

I wrote a few more paragraphs, but none of it really matters here. My point it that if i were a true gambler i would be buying large amounts of call options on CCO, PDN, DML. As these free fall due to 'margin call' forced selling at this level of baby bathwater has never been so enticing?!

With oil falling down and gas in the tank scarce do refiners like SUN-N and VLO-N stand to profit? Squeezed to death by record oil prices these guys have old refineries, but we have nothing to replace them? I think railways fit into the almost perfect moats too as gas/diesel prices rise.

Well one thing i can tell you for certain, my advice is worth what you paid for it!

DH