OBAMA BURNED AT THE PEDESTAL
The Well-Timed Strategy for Week Ending August 1st
by Peter Navarro, Ph.D.
July 28, 2008

The Markets

All three major U.S. indices remain in a technical sell position. The fundamentals dictating this include an inflation constraint on the Fed, slow growth (if not a technical recession), and a deteriorating global economy – both in Europe and Asia. Having your portfolio in a significant cash position has (and will likely continue to be) the best way to preserve capital. The only silver cloud is the bursting of the oil and commodities bubble. That can help down the road.

As for the financial sector, I outlined my strategy to find the bottom. Buy small shares of Wachovia and/or Fifth Third and build to a full position by doubling down as price falls or adding as price gains. I’d like to also offer this idea: I’ve begun to build a position in Washington Mutual amidst the talk of bankruptcy. Downside risk is minimal in dollar terms on a four-buck stock, and I view this venture more as an option strategy than a stock strategy.

The other strategy I have showcased and adopted in my own portfolio is to focus on business-cycle insensitive biotechs. I’m doing well with SNTA and HALO. MODG is an interesting stock. I’m under water with NGSX but think it is undervalued.

Presidential Politics

Ran across the July 2nd edition of Time that featured an article about Obama as a poker player and McCain as a craps shooter. This caught my eye because in my If It Rains In Brazil investment book, I make a big deal about the difference between intelligent speculation and stupid gambling.

The intelligent speculator works the odds and only bets when the odds are in his favor. That’s what poker is all about. The undisciplined gambler plays games of chance in which the odds are clearly in favor of the house – games like roulette, slots, and, yes, craps.

The only way to justify playing craps is to assign some positive value to the thrill of winning and losing large enough to offset the inevitable long term losses. Otherwise, playing craps is just plain stupid.

As for who you want in the White House, you would generally prefer a poker player to a craps shooter – but then again, the last real poker player in the Oval office was Nixon.

On another note, it’s damn fascinating to see Barack being burned at the pedestal. While his adoring fans adore him, it seems to piss a lot of other people off. In this vein, and as for his recent trip, Obama should have left it at Iraq and Afghanistan and skipped Europe. The specter of all of France gushing over the “black Kennedy” only feeds into his elitist baggage. This is all why the polls get closer and closer the more seemingly “positive” press Obama gets.

This is all very familiar to me. It’s not unlike what happened to me when I ran for office in San Diego years ago – and I wrote a clear warning about this months ago.

At this point, I think McCain wins, but there’s a lot of slips to be made yet between the cup and the lip.

Quick Takes

1. Wal-Mart has agreed to unions in China but remains Pinkertonesque in its non-union strong-arming here in the U.S. Go figure.
2. And speaking of China, it’s been cutting visas for businessmen to control the flow of visitors to China during the Olympics. The odds of some really ugly public demonstration dustups continue to increase.
3. A buddy of mine went to China this month and had his room rifled and a copy of my China Wars book stolen. Plus, he couldn’t access my website from China, even at places like foreign hotels where access is easy. Tongue in cheek, he informed me that the only things he couldn’t access were porn, the Falun Gong, and peternavarro.com
4. The Barron’s cover story on prostate cancer neglected to mention a treatment for prostate cancer that is safer and cheaper than robot snipping. Endocare (ENDO) uses a method to freeze the prostate that is far less invasive. The company is undervalued because of some shenanigans by a past CEO.

THE CHINA EFFECT

Please see my latest You Tube report.

“Any trader or investor who ignores the power of macroeconomics over the world’s
financial markets will, sooner or later, lose more than they should—and if they are
trading on margin, perhaps more than they have.” -- If It's Raining in Brazil, Buy Starbucks

The Market Edge Market Summary from www.marketedge.com 

CONTACT INFORMATION
Peter Navarro
Irvine, California USA
Email  |  Website

DISCLAIMER: This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling, or holding of any financial instrument whatsoever. Trading and investing involves high levels of risk. The authors express personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The authors may or may not have positions in the financial instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future performance.