Sunday, March 13, 2011

RSY XXIX: Sell MRH @ $18.01

David Brown last week noted that the week was nasty for the equity markets and this next week can certainly continue its nastiness. It not only has the same problems as he stated below but we also have the ongoing tragedies happening in Japan. We all pray for the safety of all their citizens and visitors and that they will recover quickly from the damage that has been the worst disaster since the end of World War II.
It has been a nasty week. The crisis in Libya and escalating oil prices continue to pummel the market, and today, two other global giants joined in the fray. China announced a significant trade deficit, and Japan revised its 4th quarter GDP downward by 1.3%. Then U.S. jumped in, announcing a widening trade deficit and initial jobless claims that were worse than last week’s (though still within the expected range). Nothing else out of the ordinary happened, but all this was enough to send the market to its knees. The S&P 500 dropped below its 50-day moving average for the first time since August 31, 2010. That, we consider a bearish sign.

The RSY portfolio is not significantly exposed to international affairs but any plunge in production in one country can create contagion effects on world-wide production and thus economic growth.

RSY recommends a sell of MRH of the remaining 200 shares (out of the original 400) on Monday at limit price of $18.01. Sabrient had recently changed the rating on MRH from Hold to Sell and the current events only solidify the need to sell off one of our best performing stocks in the RSY portfolio. One important article to read is at Japan Disaster Shows Coverage Gaps, But Quake Still Costly For Insurers. RSY hopes that the limit price of $18.01 is low enough to cover any short term drop, but RSY also recommends to closely follow it on Monday morning and make adjustments accordingly.

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