Not trying to throw a wet blanket on people's hopes. FWIW, I think K will get FDN into production at some level that makes a profit. Then they can set about exploring the rest of the trend and find those other 10 M oz's I'm sure are there.

When I said "sold down to the sleeping point" I meant I've taken it down to where I don't have to concern myself with it and can focus on other trades. I still have a small position and I've kept the warrants as well, since they are an easy bet with lots of leverage.

My concern was mainly with having an outsized position in what is clearly a secular bear market. I've been using these rallies to lighten up in preparation for the bargains I know are coming. Right now lots of stocks look cheap, but this is a bear market and things always get overdone to the downside, so I"m not in a big hurry right now. Liquidation of hedge funds is ongoing - I expect the industry to disappear before this is over. Mutual fund redemptions continue, plus we're coming into year's end, which means tax loss selling and position squaring for Q4.

To stay on my toes, I'm following this guy very closely. Haven't done any of his trades yet, but his daily market commentary is great:

http://www.tradingwithtk.com

I tend to agree with TK when he says the market feels very heavy. There are no longs with any conviction outside of Warren Buffett, and I wonder if he didn't make his call for patriotic, rather than practical reasons.

Another point I'd draw attention to: Most of today's players have no personal experience of a genuine bear market. Their knowledge is limited to 1987 onward. That was the beginning of the Greenspan era where every time the market tanked it was met with a flood of new money which took it back up.

Well, that doesn't work anymore, which is new territory for most people. This is a major secular change we're dealing with here, not a garden variety bear. That fact has to be beaten into people, and we have to see genuine capitulation before we can move up again. How long that takes I have no idea - things move a lot faster today than they did in the past - but a few months of selling isn't going to do it. We could be basing for a year or more before we move up. That could be what we're seeing now - the start of a long trading range that takes us well into next year. Or we could be setting up for one final 1000 point drop which sets the new base. I don't know, and as long as I'm not certain I'll stay mostly in cash and just trade at the margin.

One thing I've learned (the hard way) over the years is that you don't fight the tape. People lose money trying to game the market when they should just listen to what the market's trying to tell them. Right now it's telling us there are more sellers than buyers, and until that changes I'd just as soon take the sidelines. Cash is a position too. It doesn't earn much, true, but that's not your primary concern in a bear market. Capital preservation is the way you survive the bear. Staying whole so you're around for the next cycle is what you want to focus on right now.

Like all things, this too shall pass. I'm looking forward to the next bull market actually, which I think will be driven by peak oil and the need to finally address the problems of energy production and conservation. Now is the time to start planning for this, while everyone's attention is focused on the credit crisis. Like anti-aircraft fire, you make money in the market by aiming ahead of the target, not by following a herd of stampeding wildebeasts.

None of this is investment advice, it goes without saying. We each have our own hand to play. I'm just relating how I'm playing mine. If conditions change, so will I. When you're dealing with a force as powerful as The Market, it pays to be as small and humble as possible so the Gods don't notice, and strike you down.

ebear