Date updated:04-29-2007
What I plan to do when the market really corrects. Is it going to happen this week, likely not. And maybe we temporarily reach new highs in the Dow, S&P, and NASDAQ, but it won't last long. This is the scenario I'm watching for: Inflation spikes; the sub-prime fungus, as D. Kass calls it, consumes Alt-A lenders and triggers credit-tightening; an LBO sours due to credit shock; hedge funds abandon their positive, short-busting bias and melt 5-10% from the market in a hurry, followed by mutual fund withdrawls + retail panic selling. I hope none of the above occurs, but when it does, here's how I play my hand.

-
QID
Ps Utlrshrt Qqq - $21.242
- -0.55%
- $21.4001
The NASDAQ is the most vulnerable of the indexes when a correction comes. This vehicle shorts it 2x. I would be a buyer at current levels-- under $52. At $50, which it's breached only temporarily, it's a steal.

-
TWM
Ultrashort Russel - $29.21
- 0.00%
- $N/A
Small caps have outperformed their larger bretheren considerably over the course of this secular bear. While I believe in finding select small caps to invest in, the index's valuation is simply not sustainable-- correction or no. Like QID, TWM shorts the index, the Russell 2000, x2.

-
KEWL.PK
Keweenaw Lnd Assn - $170.00
- 0.00%
- $N/A
This is a company that will not flinch in a downturn. Timberlands are a great investment in any market, no matter how over or under valued equities are. Given the company's quality timber stands, real estate, and mineral rights, it is largely unaffected by the deteriorating economy. Futhermore, timber historically outpaces equity markets by a substantial margin in bear markets...see J. Grantham's writings on timber for specifics.

-
IRBT
Irobot Corporatio - $13.66
- -3.05%
- $13.85
Small caps as a whole will get punished in a correction, but that doesn't mean I don't like a few names. IRobot is one of them-- with excellent numbers expected in 2008 (when they roll out several more military products), the company will be a major player in the growing field of robotics for years to come. I'd rather get in now, before some breakthrough sends the shares flying (or another company swallows their military division).
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A. I'm trying to unload my preferred FCX
stock as we speak, if that's any
indication. It may be awhile before the
fundamentals catch up with the stock
price.
A. The only one I own : SLX,
too hard pick a winner out all of them
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