Socialism in USSR fell apart in 1991. Capitalism in USA is falling apart right now.

How many more companies and financial institutions are going to get bailed out and why? Why do taxpayers – you and me – have to pay for some greedy or not-too-smart people and share with them our hard earned money? Why do we have to pay our mortgages & our bills,  while those “delinquent” don’t? Why nobody bails me & you out of all the losing trades, while letting us keep all the trades making money?

This is a Decline and Fall of the American Empire.

I don’t know what is going to happen to the stock market tomorrow – Monday, September 8, 2008. Probably it will run. As I pointed out quite a while ago to one of my colleagues – “America is a country of happy idiots”. The more I am involved in the stock market, the stronger I am convinced in it.

I can’t otherwise explain the irrational stock market behavior in many instances. For example, last Friday the news came out that the number of foreclosures has dramatically increased AND unemployment rate surged to 5-year high of 6.1%. What would be the rational reaction to such news by the stock prices of homebuilders?  More homes for sale + less buyers = less sales & less profit (if any). Yet, almost all the homebuilders have gained in price on September 5th:

KBH +$1.29

MTH +$0.65

DHI +$0.95

PHM +$1.07

TOL -$0.21

LEN +$1.48

BZH +$0.90

HOV +$0.25

CTX  +$1.26

XHB +$1.23

I still hope that at least gold will go up on Monday, as expected $300,000 billions cost of Fannie Mae and Freddie Mac bailout can be only covered by the new printed money. Does anyone except for me understand this?

First of all, let me share what actually has been done in regards to trading.

On July 15th I bought 20,000 shares of CPTC at $1.23 per share – thanks to a tip from my OBGYN. Being true to myself, I didn’t do much research other than technical analysis.

The graph looks quite attractive from the technical standpoint, even though it is a “dollar” stock. Significant is the fact that it’s been trading for over 7 years and is still around. In these seven years the stock had 4 very impressive spikes and overall has a very defined support and resistance levels.

Yet, what really got me to even look at the chart of CPTC, was my fundamental outlook on the current economy. With the price of oil being at all time high, it is reasonable to anticipate that alternative energy sources will become very fashionable. One morning, I got a feeling that it was time to do a research and find a few companies fitting the profile. Later that very same day, my OBGYN (and our good friend) told me about CPTC – Composite Technology Corporation. Never claiming to be a Warren Buffett, I didn’t feel I have to understand what does “composite technology” mean and what CPTC does exactly. Brief research revealed that “the company’s core and foundational product is their revolutionary ACCC (Aluminum Conductor Composite Core) cable, which doubles the current carrying capacity and produces a higher operating efficiency that helps decrease power generation costs and meet emission standards. The other two products the company offers are lattice towers and wind turbine systems.” To me it was enough to pull up the chart.

However, it took me another 4 trading days to get back into my favorite short selling mode. The market has fallen quite a bit while I was away and I was concerned about jumping in at the low point. So far, I have been proven right. July 15th was a (temporary ?) turning point, as in the next 6 trading sessions DJIA moved almost 900 points higher. Having lost touch with the market, I just barely wet my feet by shorting PHM and TOL (homebuilders, well known to me). My entry points were far from perfect – $11.57 & $19.26 accordingly, but still seem to be quite reasonable. The one thing that I found very annoying – KBH was (is ?) not shortable anymore. I don’t think KBH was one of the 19 companies protected by SEC (Security and Exchange Commission) against “naked” short selling, still it followed suit with MTH and fell out of my portfolio.

Notwithstanding the above, the “highlight” of those two weeks was a panic, inflicted by the price of Wachovia Bank (WB) falling to $7.80, before bouncing up to not much more secured level of $14-$16. This event triggered our “emergency family meeting” and resulted in transfer of funds to a more sound (at least for now) financial institution.

Be aware of the Bear!

PHM – Pulte Homes Inc.

TOL – Toll Brothers Inc.

KBH – KB Home.

MTH – Meritage Homes Corporation.

CPTC – Composite Technology Corporation.

WB – Wachovia Corporation.