covering CAKE +17% in 1 month

We hope readers of the blog have weathered recent market events and moves as well as we have, as we are invested predominantly short along the lines of our repeated bearish market predictions.

We are truly fortunate that the markets are validating our research and forecasts.

Those unfamilar with our past market commentary, we refer here : http://ridingthegravytrain.blogspot.com/2008_06_01_archive.html

More recently : August 18 2008 - "... we believe a new and severe downturn in the markets will begin soon."

We reiterate today that the markets are very treacherous and we believe are very likely to go very much lower very soon. Verily.

There may be massive rallies, perhaps starting tomorrow, however we will not be fooled into the idea that these markets offer "investment opportunities" or "value". The very experienced and sophisticated investors will have their own ideas of course, while those following television personalities and stock pickers who can only succeed in raging bull markets will lose even more than they have recently - indeed very much more - if they persist in their market activity or come too late to the shorting table.

Or perhaps the ever-reliable and free-thinking investment bank anaylsts are a preferred source of actionable information. Hardly.


We prefer to think for ourselves thus we fear an imminent rally, perhaps on futher meddling by the so-called authorities. It is largely their fault that things have come to be as they are, ergo they wish to appear to be in control and "doing something".

We cannot blame them for trying to cover-up, however history both long past and relatively present teaches us that this meddling only makes things worse. Rate cuts especially, so bear that in mind as the U.S. Fed meets tomorrow.

We have been extremely lucky in the accuracy of our predictions of government agency interventions in the markets the past year, and if we had to guess we'd say there will be a surprise rate cut tomorrow. Terrible policy, but quite likely popular policy that could spark a market rally.

Certainly sparking a market rally is their main concern at the present time. Indeed, today President Bush announced that the markets are fine, a clear indicator that things are much worse than they seem.


Amidst this chaos, we book the generous rapid gains we've enjoyed the past month via shorting Cheesecake Factory, CAKE. We now cover for a profit of 17% in just 1 month, thus turning today's negative markets into a positive result for us.


With this trade today, thus far in 2008 we've closed 23 positions, all winners both long and short, for an average 29% gain on an average holding period of just over 6 months which implies an annualized gain of 58%

Despite the markets, this remains remarkably in-line with the results offered in our "August 2006 Review" which those interested will find in the post below, immediately preceeding this one you are now reading.

Perhaps best of all, no quick trading required to achieve these results. All trades here are posted outside market hours, allowing for leisurely reflection and execution.

We pray to the Market Gods for continued good fortune.


We hold other shorts in order to profit further should markets continue to drop, and should markets rally significantly we will reload at least some shorts we have recently covered for generous gains.

We also hold longs, some of which are of course not doing well, however we had no illusions going into them that equities positions are anything but speculative and that the general markets were due to collpase. Luckily the consistent profits we've booked on closed positions have paid for the open positions many times over, and we've tried to hold positions that once regular markets return will turn to our favor. However that may be a long way off.

We will not be entering new long positions any time soon, nor will we soon be adding to previous longs on which we had stated we'd wait for lower levels to complete our entries. We expect much lower levels at which time we may add to complete our entries as planned.

We refer here to our posting of July 07 of this year :

"We finally add long holdings, with an initial entry in refiner Valero and telecom giant Verizon. These last traded at $36.79 and $35.43 respectively. Our simple view is one of near value, given the market and economic environment, and of somewhat oversold conditions.

However we remain in a bear market and it'd not surprise us to see these trading much lower in the coming weeks, at which time we might say they've become true "value plays" and enter additional long positions. Should there be a near-term market bounce however, or especially should we prove to now be at a market bottom (which we very much doubt but must prepare for all possibilities), the upside move in these shares should be quick and very profitable.

In any case, we shall continue to accumulate relatively attractive "blue chip" holdings as the markets wither."




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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