covering LEH +26% and AXL +28%

Our calls on market tops continue to prove surprisingly accurate and very lucky indeed.

Not wishing to push our luck, we now book some profits. We cover our Lehman Brothers, LEH, short as well as our short on American Axle, AXL. These positions have been held for 1 month and just over 4 months respectively.

We expect both to be a great deal lower in coming months, however that'd be on the condition of severe general market declines which we are also expecting. If we're correct in that regard, then we have remaining shorts on which we can book profits at that time.

However if we're incorrect, we'll be glad to have booked these gains now. Seems like a prudent move, and a "win/win situation", especially with so much talk of Lehman's troubles now in the media which has resulted in the stock becoming a very crowded short and it shall likely remin so at least until the company's "earnings" date of June 17th. Further nervousness is caused due to talk that the company may announce their numbers early, so we prefer to step aside at least until the stock becomes again overbought or some of this confusion is cleared.


With this sale thus far in 2008 we've closed 14 positions, all winners both long and short, for an average 25% gain on an average holding period of less than 7 months which implies an annualized gain of 44%


Readers have asked about our outstanding Google, GOOG, short position. We wrote on May 7th, "While the DJIA has recently tentatively breached 13000, we continue to see significant resistance above that level thus we have not turned away from our bearish stance and we proceed with caution since we continue to believe that the general markets, commodities, and the majority of individual stocks are considerably overvalued and overbought at present.

Due to this belief we have not yet covered our Google, GOOG, shorts entered per this blog April 21st. No update = no change in our position. The stock has indeed risen more than we had stated we'd be comfortable with, however upon re-evaluation we see that it remains within its down-trend from its all-time highs last year and remains in our opinion significantly overvalued and overbought thus remains as good a way as any to be hedged short per our general bearish market sentiment."

This continues to be our sentiment. In hindsight, we perhaps entered early and failed to add shorts at the appropriate technical levels, however in the fullness of time we expect this position to yield us profits.


On May 7th we also entereed an effective short on oil, which surely all readers will know has been hitting new highs. With DUG closing Friday at $28.23 it is slightly below our downside target of $29, and indeed it has recently been as low as $25, however upon review we remain comfortable holders of that effective oil & gas short position via DUG.

Remarkably on Friday despite oil and gas hitting record highs, DUG rose 2.5% To us this reveals many others are of the belief that the oil rally is quite overdone and not fundamentally based on a lack of supply. We can't even guess if this is a sign of fools rushing in to join us on the short side or if it is a sign of cooler heads prevailing, but while we run the risk of appearing very foolish we remain comfortable with our position if for no other reason than it is a bit of balance against some of our other short holdings.

A continued rise in oil & gas prices would likely be coupled with sliding markets in which case our shorts would benefit, while a significant decrease in oil & gas would make our DUG position profitable while it's likely general markets would rise thus our other shorts would suffer somewhat. In fact, we believe that in time the markets will fall along with the price of oil, gas, and most other commodities in a general deflation scenario worldwide. As usual, our ideas run counter to popular thinking and we're comfortable being in that position too since it's the position from which we are eventually proven to make our most accurate and profitable calls.




We receive no remuneration or incentive directly or indirectly in any way, shape, or form for buying or selling the stocks we do, or mentioning them in this blog. If we hold existing positions we divulge the fact, otherwise we generally buy and sell as diarized here. This blog itself is merely a diarizing of our thoughts and trades and is in no way whatsoever to be considered investment advice of any kind. Always without fail consult your broker or investment advisor before making any investing decisions.

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