Wednesday, February 28, 2007

The Chinese Riddle... and Jim Rogers

Yesterday's worldwide selloff was pretty amazing... The worst single-day drop on Wall Street since 9/11... and the worst in the Chinese markets for a decade. Which raises the question: Why is China the best investment when it is the worst investment?

The answer comes from our old friend Jim Rogers, the smartest old Southerner since William Faulkner... Jim cofounded the Quantum Fund with George Soros, another tremendous investor.

Together they made their investors 3,999% returns in the first 10 years of the fund's existence.

Jim told me recently (he called me from his hotel room in China, in fact) that China would soon suffer a tremendous knock-down... shares would plummet... the world would be aghast... the lemmings would be running in all directions... and THAT, he said, would be the "Next Great Buying Opportunity."

I bet I know what Jim is doing this morning... snapping up fistfuls of his favorite Chinese stocks... building his yuan portfolio... backstroking merrily through the five feet of warm blood running through the streets.

Perhaps it would behoove us to do the same?

This could be a tremendous time to build your position in Kookmin Bank, for example, or Bunge, another good China Proxy play in our portfolio.

Because although yesterday's bloodbath was dramatic, here we are... still breathing, still surviving.

Fact is, we didn't get stopped out of a single position yesterday. Now we might today, who knows? Cemtrex is at .005, not far above our trailing stop of 0042. But even our proxy plays on China such as Kookmin Bank are still in the black, although they got slammed yesterday, of course.

I'm guessing the markets will remain sluggish today, with about two-thirds the volume from yesterday as everyone licks their wounds and waits for some signal... the lemmings, dear hearts, are always waiting for signals. I'm guessing the next one will be given in Fedspeak... but we shall see.

Meanwhile, my buddy at, Al Murauski, ran a couple of our positions through their beta trailing stop software to show where we are relative to our trailing stops. It was a nice gesture and we thank him for it. Here is the chart for Bunge... you can see the big it we took yesterday.


You can see that even with the massive pullback, we're still well above our current trailing stop... This gives a nice picture of the position's history since we got in...

Al's software does something else really nice, too... It adjusts your trailing stop automatically as the stock hits each new high... In some circles this is referred to as a "laddered stop" and it technically is how a trailing stop should work...

The only reason we don't always do laddered stops is that it would require almost constant monitoring of a stock trending upward.

So we're going to be beta testing Al's software, and writing about it in this space from time to time, because anything that can help us manage trailing stops with more efficiency can also help us beat the markets... which, besides keeping it green, is what we're here to do.

Good trading,


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