All Clear!?

Best day of the year. Is everything ok? The Europe ECB and IMF somehow find $1 trillion to make everything okey-dokey. Where does all this money come from anyway? Who will ultimately pay for workers in Greece and other countries to get better benefits and pay lower taxes than us? I do not have the answers. But I do think that something fundamental has to change, as opposed to Central Banks continuously dropping "free cash" on every problem. I suspect this is essentially "kicking the can down the road" or at the very best, buying a little time. I am more and more convinced that at some time the Sh*t will hit the proverbial fan.

I do read (and invest) in the Hussman funds. I have mentioned several times here his wonderful weekly essays on the state of the economy. Here was his Monday essay (Greek Debt and Backward Induction). Here is his brief recap:

"The bottom line is that 1) aid from other European nations is the only thing that may prevent the markets from provoking an immediate default through an unwillingness to roll-over existing debt; 2) the aid to Greece is likely to turn out to be a non-recourse subsidy, throwing good money after bad and inducing higher inflationary pressures several years out than are already likely; 3) Greece appears unlikely to remain among euro-zone countries over the long-term; and 4) the backward induction of investors about these concerns may provoke weakened confidence about sovereign debt in the euro-area more generally."

He also spent some time talking about past "air pockets", which is when the stock market mid day literally "gaps down"/ He felt that people were grasping when they intimated that last Thursday's sharp mid day decline was some sort of computer glitch. He believes that since many hedge funds approaches are highly correlated and even highly liquid stocks (such as PG) at some point can have sellers overwhelm buys and no price may exist. To me that is a very interesting and scary insight. The ultimate crash of the market may be caused by computers trading.

It makes one think. My one move today was to sell my STD as it jumped 23% this morning. I was thrilled as I feel the solution was just a band-aid.

Ok, I am off my soapbox. Back to MFI. I sold HCKT today. I ended up picking a mechanical stock, SOHU, to replace it. Time will tell if that was the best choice. I also bought two non MFI stocks: SBS (a Brazilian water utility with a decent dividend) and IMPUY (a platinum company to go along with my gold plays) as I think it is time to get defensive.

Finally, bad news for CSKI this evening (China Sky One Medical Announces Preliminary First Quarter 2010 Results; Reschedules Earnings Conference Call). I suspect the market will push them down 15 to 20% tomorrow as they basically say they will be short on earnings for 1q (versus guidance though still up 15%) and they are restating some non-cash transactions at year-end. This is the very reason I diversify, at least one stock crashing and burning won't kill me.