We have had an ugly day to be sure and as I write this all the talking heads are breaking out the chart types to explain what is going on. Some think we will go lower, some think we will bounce. It COULD be the start of a bigger correction or MIGHT be a buy the dip moment. Someone just said that you should be buying when there is fear and someone else mentioned buying when there is blood in the streets All this with the market less than 3% of all-time highs. It may make for fascinating conversation but all this predicting and guessing about where the market is going to trade over the next few days or weeks is a colossal waste of time, energy and brain power. I have no idea where the market will go. Neither do you. Nor does the guy with the nice suit and pretty charts. We can only put ourselves into position to react to what the market does, not predict what it may do.

It is obvious that right now there is some blood being spilled in the material sector. Oil drillers, oil services, metals miners, coal companies and iron ore concerns have been blasted this month. If you looked at the prices and valuations in these sectors you can only draw the conclusion that there is an unprecedented global depression that is going to last of a considerable period of time ( to borrow a phrase from the Fed.) We owned quite a bit of these stocks coming into the bloodletting and we will own more when it finally reverses. Of course the question everyone wants to know is when it will reverse. I don’t know. No clue. Not even a hint. I do know that I will move very slowly and add to my positions based on price to my estimate of liquidating value and the magnitude of a particular stocks decline.

Is it fun in the short term? Not so much but I keep my eye on what these issues will be worth five years from now when we have more of a recovery in the economy and the resources industry. I have seen this before in various sectors and stocks and I suspect I will again in the future. Unless the world is , in fact , going to end if a great deflationary spiral these stocks are far cheaper than they are worth based on their asset value.

We rolled out a new service this week to help you find cheap socks with huge potential. The bottom decile report is going to take a monthly look at these stocks trading in the bottom 10% of the universe as ranked by price to tangible book value. Every month I will help you find these cheap stocks with high f and z scores, high dividend yields and other fundamental and statistical factors. I will track the cheap stocks tht have insider and unusual institutional buying. Every quarter I will take the time to dig out which smart value investors, activists and hedge funds are buying these super cheap stocks and deliver the info right to your inbox. I will give you everything you need to stay on top of which cheap stocks have the potential to be bottom decile winners and which ones may be “buggy whip” stocks on their way to extinction.

Could you do it yourself? Of course you could. It took me about 20 hours to put together the first issues and the combined cost of the research services and databases I used to put it together run me about $2000 annually. So if you want to spend the time and money you can do it yourself .Or you can pay me $99 a year ($74.50 until September 30) and I will do the work for you. Of course current Deep vlaue subscribers get this free as an "add on" to their service

I wouldn’t be me if I didn’t point out that as we are plunging this afternoon my portfolio of small banks is actually up a smidge. Small banks generally do not move with the market during this little bips and bumps. We only see hard core selling in these stocks when we have the type of tumbling market that create margin calls and forced selling. Those of course are then a magnificent time to buy more of these little gems. The trade of the decade is real, its working and you should be in it.

Where is the market going? I have no clue at all. Personally I hope it goes a lot lower and soon. I have lots of cash and I can deal with a temporary drawdown in the price of the stocks I do currently own. I will be a buyer as they decline and look to add a bunch of safe and cheap stocks that tumble down into my sweet spot. That would be absolutely marvelous but I have no idea if and when it will happen. At some point the forced caution caused by the lack of opportunities will be rewarded and I have learned the high returns provided by patience.

In the meanwhile we have lots of books, cheap banks, good wine and playoff baseball to keep me busy

Cheers

Tim

Song of the week : Stay focused on valuation and eventually we all will get to

https://www.youtube.com/watch?v=fZs9Wef45ZM