If Ya Can't Beat 'Em, Join 'Em! 12-1-05

Good Afternoon.

The market continues to hurt the Bulls very badly. We intentionally said the Bulls because there are no more Bears. Just underinvested Bulls and severely underinvested Bulls. The problem is that there are only approximately 21 trading days left in the year. The implications are that any underinvested Bull needs to get on board or risk underperforming this year. With so few days left to trade there simply is not enough time for patience. Waiting for stocks to come to you doesn't do most managers good when their clients pull the money on Jan 2nd for underperformance.

On the flip-side most managers are still showing single digit returns. They are well aware of how easily and quickly that can be given back before December 31st. So it would not surprise us that once the selling arrives (if it ever truly arrives) it can become a self-fulfilling nightmare. In other words, the Bulls are fighting the Bulls and none of them know which to be more nervous about: positive on the year yet underperforming or flat to negative performance by year-end.

In light of this your friendly neighborhood Kcap Team has decided to temporarily stop trying to trade ahead of the market. The best course of action is to look for confirmation of direction in the form of upward Spike's and downward Cliff's (Gaps would work just as well). Once we have identified the initial direction of a move we will simply follow along. Of course this means that we will miss out on the initial move and risk the possibility of getting caught in a whipsaw. The follow through however, should be significant enough to still play. In keeping with this strategy we have been busy today redeploying some of our cash into our favorite names.

Sorry for the late post as we've been very busy buying.

Hope you're doing well.

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