Beep Beep!

Remember Wiley Coyote. Now there are 47 readers of this blog and most of you are old enough to remember Wiley Coyote and Road Runner. Even though we would know how each scene was going to end, we sat waiting for the scene to unfold. Either the dynamite was going to explode too early, or too late, or Wiley would run through the painting he just painted to his demise, or the ACME Corp Rocket he just built would run out of fuel, but it always ended the same.

Does this sound vaguely familiar to anything going on in the market. Merkel and Sarkozy stand in front of podium and say we kinda have a deal. (That would be Wiley building the rocket). Then the market takes off because we kinda have a deal in place. (That would be Wiley inchin closer and closer to Birdus Fleetus Fastus aka Road Runner.) Then the truth is discovered and the market crashes 200 points. (That would be Wiley running out of fuel somewhere over the Arizona Desert-by your home Butch.)

As I got older and wiser, I actually turned the channel during the road runner cartoons because I was mature enough to know what would happen. Granted that was only a few months ago, but we did mature. So how come it is we got Wiley Coyoted for the 16th time (According to my calculations giver or take 2.) This time it hurt.

Today we were hit with a surprise that Berlusconi of Italy wants elections to deal with the issues rather than a new government to address the debt debacle. As a result the Italian 10 year note floated up above 7%. Sovereign debt above 6% is not sustainable unless you have a vibrant growing economy with a GDP above 8%. Greece added to the uber bad news by The PM not resigning as we suggested Sunday night. Today was the day Papandreou was supposed to have stepped down. Yield spreads in several other European countries indicate debt fall out contagion. All of this made investors and fund managers sell, sell, sell.

So what's a poor blindfolded monkey in a casino to do? First off, as we say here all the time, watch your stops. We are happy to say that today despit a 3+% downturn, we only had one holding trigger a stop alert. ARCI, Appliance Recycling, whish we entered into last week stopped out with an 8.2% loss. As we mentioned we got in at 5.99 and we are out today at $5.50. We had a sizeable position, so it stung a bit but not as much if it didn't triggers. It fell through its 20 day moving average and we are keeping it on a watch list to get back in at a new entry point. (Possibly $4.95).

The other thing to do is to look at your picks and your watch list. The market was down 3.5%. Look at your holdings. If you have a stock that was down more than 4% do your homework. Figure out why. There maybe more there than a bad day. If you had a holding that went up today and it was not a contrarian play (Like the VXX I mentioned last night. More on that later.), do your homework and find out why? KIT Digital was up 35% today. Why? If you have it do you buy more? If you don't, should you? Do your homework.

Other than that, the only thing a poor blind folded moneky in the casino can do on a day like today is, do your homework, hone your skills, read a book about value investing or trading in a volatile market. Be patient be calm and make good decisions.

Do You Homework

IBD had a great article today about doing your homework. Here is a publication that reports data but has column after column about stock tips and recommendations. This artice said not to listen to tips and recommendations or just use them for a starting point. EVEN the articles in this paper (The IBD).

A few hundred thousand people watch Mad Money everyday. (There record is actually 489,000 during the Lehaman Bros collapse.) Jim pimps stock every night of the week, but he always says, Do Your Homework.

Use the idea or stock from the IBD or the TV shows or even the drivel I write here, but use it ONLY as a starting point. Am I saying that I have never read an article and jumped on the stock. Heck yeah. Not in the last couple of years. I have learned that once you get in the habit and have a discipline, you can easily do due diligence on a stock in 15-30 minutes. Imagine going to McDonalds in February 2008 when they were expanding their breakfast menu and you noticed longer lines and had a decent cup of coffee at half the price of SBUX. And imagine you said I am going to drop 5,000 dollars on McDonalds.

Good move you would have about 9800 today. Lucky guess. There is a better chance that it will not go that way.

About the same time, there were quite a few prominent publications and website pimping an insurance company called AIG. They were saying that the company had fallen as far as it could from a pre bailout value of 1400 to 1000 a share. It was a buy buy buy. Say you did not do your homework (BTW much of the writing was clearly on the wall in their 10Q reports and just a quick check of their debt situation.) and plopped 5,000 down on the stock. That would have been about 5 shares. Today that would be worth $110.00.

How About A Good Idea

When you look at the carnage of today, it would be easy to say, "I'm done. It's cash and bonds and gold for me." (GLD did not fair well today.) You really have to keep positive and there are some really nice sectors to look at. Look for companies that are spending money and figure where and why. When you do the homework you pick up on these things. By reading the quarterly earnings you read where companies with cash are deploying those dollars.

Here is an example.

We all know the internet age is not going away and smart phones and tablets like the iPad are here to stay and will be as ubiquitous as cell phone have become. That means the infrastructure to support all of that communication is expanding.

When you read the SEC filings for the likes of Google, Intel, Amazon, Microsoft, Apple, Salesforce and Facebook, you start seeing some serious money being spent on data centers. Think of a data center as a building or several buildings the size of a few football fields filled with row after row of server racks.

Google is building huge facility in Finland ($250 million+) data centers are huge energy hogs so you see these things being built in cooler climates. Russia is home to new data center built by Intel, somewhere in an old paper mill. Facebook has a Oregonian data center that is 5 football fields big. Microsoft and Amazon also have sizeable data centers in Oregon.

And Apple has a one billion dollar facility in Maiden North Carolina. It is to serve the billions of transaction for iTunes and iCloud. IBM has numerous data centers in North Carolina as well.

A few of these companies do the racking themselves but most outsource to two major players. Equinix EQIX and Rackspace Hosting RAX. Other players in the sector include DELL, BRCD, SAP, ORCL, JNPR, EMC, and BMC.

Some of this research came from timely articles in IBD, WSJ, and Value Line Survey. Do Your Homework.

Salve Lucrum