Don't Fight the Fed
Don't Even Think of Fighting the Fed
Cover All Short Positions Except Coca-Cola (KO)
A Short Buy List

The interest rate cut today of a half point came as a surprise to us as well as to the market generally. Although we remain quite pessimistic about profits and, by extension, of stock prices, there could be a substantial rally. More to the point, stocks might have stopped going down and/or have finished going sideways.

It was notable today though that many stocks previously thought of as defensive were knocked down hard while many that looked as if they could keep on going down forever had the greatest rallies.

Given the lowering of interest rates and the huge gain in stocks generally, prudence dictates covering all short positions except Coke. This stock is immensely expensive and most likely investors will be feeling they don't need to own this stock when more dynamic stocks beckon.

We have some considerable doubt as to whether we have come through anything like the final low. in The event of disappointing profits, the bear market could resume. In that case, it is not out of the question that the major indexes could halve even from here. It has happened before, and right now we have barely seen a whiff of anything like a recession the way they used to be. Sure many stocks have washed right out but there has been no general capitulation.

We have a very short list of stocks which appear top have really solid fundamentals, reasonable charts and good reward to risk.. We are retaining all our currently owned stocks even though they may have to retrace. There is no reason to dump any of them.

Notably we are not buying any of the previously almighty high tech leaders although there are a couple of high tech stocks on the list. Note that we include one rather speculative stock which would not normally qualify for us to recommend. Nevertheless, we have been following the story of SVNX for some time and we think it has possibilities. The company supplies software for wireless access between customers and banks. The stock has been totally beaten up but the daily chart now has a credible double bottom.

Here is our list:

Countrywide Credit Ind (CCR) 51.00
Lindsay Manufacturing (LNN) 23.25 The leading maker of irrigation equipment
Symantech (SYMC) A leading supplier of Internet security barriers, with a reasonable PE and great growth prospects
Texas Instruments (TXN) $50.25 A powerhouse of a company with a beaten up stock
724 Solutions (SVNX) $19.50

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