The Kirk Report

Heartbreakers

Earlier this week I asked members to submit the name of the stock that they thought would be the largest heartbreaker between this year's Valentine's Day and the next.

As typical with prior years, I received fewer responses in this poll than any other I do throughout the year. My guess it has something to do with the fact that this is the only time of the year I ask for names of stocks that members think will go down and lose money for their shareholders.

If that doesn't say something about the general tendency for people to only think in terms of what is going to go up, I don't know what will. In fact, in casual conversations I have with others (especially those who don't know what I do for a living) I enjoy asking people to tell me their favorite short sell idea. More often than not I receive a blank stare while those same people are always more than happy to share the name of a stock they think is going to be the next Google! When the market comes up in conversation with friends and relatives, try doing the same thing as I do and see what happens!

For this year, 42 "heartbreaker" stocks were submitted. They are Apple (AAPL), Accelrys (ACCL), Agnico-Eagle Mines Ltd (AEM), AIG (AIG), Amag Pharmaceuticals (AMAG), Amazon.com (AMZN), Aeropostale (ARO), Boeing (BA), Baidu (BIDU), Coeur D'alene Mines (CDE), Concur Technologies (CNQR), Capital One (COF), Cree (CREE), Dex One (DEXO), New Oriental Edu And Tech (EDU), Green Mountain Coffee Roasters (GMCR), Google (GOOG), Garmin (GRMN), Goldman Sachs (GS), Hsbc Holdings (HBC), Internet Gold-Golden (IGLD), Isramco (ISRL), JPMorgan Chase (JPM), Kimco Realty (KIM), China Life (LFC), Elong (LONG), Medivation (MDVN), OncoGenex Pharmaceuticals (OGXI), Overstock.com (OSTK), Pfizer (PFE), Pinnacle Airlines (PNCL), Radian Group (RDN), Research In Motion (RIMM), Solarfun Power (SOLF), SunPower (SPWRA), Terex (TEX), Tenet Healthcare (THC), Toyota(TM), Trina Solar (TSL), Vertex Pharmaceuticals (VRTX), W Holding Company (WHI) & Wynn Resorts (WYNN).

However, please note there were 6 stocks that received more than one vote: both Apple (AAPL) and Baidu (BIDU) received 4 votes, AIG (AIG) received 3 votes, and Green Mountain Coffee Roasters (GMCR), Medivation (MDVN), & Toyota (TM) received 2 votes each. I also removed three stocks submitted that were trading under $5 per share (Sirius Xm Radio (SIRI), Zale (ZLC) & Western Refining (WNR)) from the entire list.

A couple of points here. First, it is interesting to see Toyota in this list primarily because of any company has already broken the hearts of many customers and shareholders. From a contrarian standpoint, it will be interesting to see how the company does over the coming year and whether members are correct that this will continue to be a major heartbreak. Second, also interesting to see both Baidu & Apple on this year's list again. Both of these stocks also were in last year's heartbreaker list and certainly didn't cause much heartbreak as they were both up quite a lot since last year's Valentine's Day. Perhaps this is the year, or not. We'll find out!

As always, I'll create two watchlists from this year's survey - one watchlist of the stocks receiving more than one vote (which in the past tends to outperform, or in this case, hopefully underperform) and one watchlist containing the entire list. In a year from now we'll take a look at how all of these perform and I will award a nice prize to those who submitted the worst performer.

Good luck to the members who submitted their favorite heartbreak stock this year!

Hope & Fear

In the survey I asked members to provide their hopes and fears for the year ahead.

To provide you a good idea of how members replied to these questions, I created two word clouds (larger text shows which things were mentioned the most) based on your replies.

First, these are the things members are most fearful of in the coming year:

Big government is a winner in the fear department along with the dollar, unemployment, interest rates, debt, inflation and defaults. No surprises here! However, you may find what members are hoping for this year to be far more of interest in the word cloud below:

The number one hope is for a correction presumably to get long stocks again, a recovery, growth, and volatility. This confirms many things I've read of late that many investors are still wanting very much to "get back in" but the market hasn't allowed them a comfortable entry point. In addition, the last hope which is of volatility may also be of some surprise unless you consider the fact that many of us our traders and most of us see volatility as providing for more opportunity.

In my experience, usually the things we fear the most are the things that impact the market the least. I've seen this happen time and time again. Much like life, the things we don't know to worry about is usually what we should be worried about the most. Likewise, the things we hope from the market, usually work against us like they have for many who've been sidelined or short since last March and who are hoping for a correction now.

Mid-Year Membership Survey Results

Recently I asked members twenty questions in order to provide me with structured and focused feedback and other information that I will share with you this week. Once again, I was pleased to discover high marks in terms of overall membership satisfaction:

In addition, quite a few of you have found my stock screen machine helpful and other feedback I received have provided me with a good suggestion list to work on as we make upgrades to that tool later this year.

However, the feedback that I'm most pleased with is how members are doing in relation to the market itself:

Interesting - this is the best response I've received to this question since I've been taking these kinds of membership surveys and this hasn't been an easy market to navigate successfully. Keep up the great work! If you can match and outperform the market overall right now, you'll do even better when things improve. As the saying goes, everyone looks like a genius in a bull market, but few do in a bear.

2008 Recession?

Members were recently asked the following question:

"Do you think the U.S is headed (or already in) a recession?"

Here's how they voted:

When members were asked the same question at the end of 2006 for last year, at the time 40% expected a recession in 2007 while 60% did not.

Dow Poll

Back in October 2006, I asked readers which level would be hit first - Dow 13K or Dow 11K? As of today, we see that 69% were wrong. So, with that known, let's give it another go.

Which level do you think will be hit first now?
	Dow 14,000
	Dow 12,000

What's Your Portfolio Status?

Have you been making changes to your portfolio in response to the market's performance over the past month? Please take the following survey:

What's Your Portfolio Status?

I have little cash and I'm very long (very bullish)I have some cash and I'm long overall (bullish)I am sitting in cash (neutral)I have some cash and I'm short overall (bearish)I have little cash and I'm very short (very bearish)

In case you want to know, here are the results from the same survey in March and February.

What's Your Portfolio Status?

Have you been making changes to your portfolio in response to the market's performance over the past month? Please take the following survey:

What's Your Portfolio Status?

I have little cash and I'm very long (very bullish)I have some cash and I'm long overall (bullish)I am sitting in cash (neutral)I have some cash and I'm short overall (bearish)I have little cash and I'm very short (very bearish)

In case you want to know, here are the results from the same survey one month ago.

What's Your Portfolio Status?

One of the many problems with investor surveys is that they ask how you are feeling, not what you're actually doing with your money. In fact, there are many times you may feel very bullish about the market's prospects, but are you also 100% long to back that feeling up?

Although I don't think a lot of people do this, when I take time to answer surveys which ask my opinion about the direction of the market (which is alway subject to change on any given trading day), I base my answer on how much cash I have on hand in my trading portfolio. After all, a good way to judge whether I'm currently bullish, neutral, or bearish at any given time is the percentage of assets I have sitting in cash and how the positions I have are positioned. In other words, if I'm very bullish, I'm going to be 100% long and have little cash on hand. Likewise, if I'm neutral I'm going to be sitting mostly in cash and if I'm bearish, I'm going to have some cash, but my positions will be on the short side (it is rare, but it does happen). Obviously, this only relates to my trading portfolio unlike my retirement accounts which are based on a passive aggressive strategy I've detailed in previous question and answer sessions.

With that in mind, how is your portfolio currently positioned? Remember, I'm not asking how you "feel" about the market, but how you are currently positioned which as we all know is an entirely different question.

What's Your Portfolio Status?

I have little cash and I'm very long (very bullish)I have some cash and I'm long overall (bullish)I am sitting in cash (neutral)I have some cash and I'm short overall (bearish)I have little cash and I'm very short (very bearish)

Your Favorite Stock Screener?

After BusinessWeek abruptly discontinued one of my favorite free online stock screeners last week (though I've been told that BW will be offering another screener at some point), a number of you have asked me for alternatives. My top two favorite replacements to BW's screener are Reuters PowerScreener and Stock Investor Pro by AAII. Unfortunately, neither one is free.

Since it has been a long time since I've asked readers to submit their favorite choices for stock screens, I'd like to ask you for your help this week. If you currently use stock screens, please take a quick moment to tell me what you use and find most helpful. Later on this week I will provide a top list of recommended choices for you to consider. Thank you!

Market Guru Predictions

Here's more from the 2007 membership survey. When I asked "With your market guru hat on, do you have any shocking predictions for 2007?", the replies, I think, reflect some of the themes, predictions, and viewpoints commonly shared among individual investors. Few predictions, in reality, qualified as truly "shocking." In addition, quite a few members didn't answer the question primarily on grounds that either they don't consider themselves a guru and/or that thinking in these like of terms often creates unprofitable bias (a point, by the way, I do agree with). Still, some very common themes expressed by members were:

• We'll see strength in first half of the year and weakness/recession in second half of the year



• Many concerns about the world political scene and the Middle East (Iraq & Iran)



• Lots of talk about the dollar, interest rates, & energy prices (both positive and negative)



• Concerns over emerging markets



• Expectations for a sharp correction sometime in 2007 (something similar to 1987)

It is true that the things that you should be most worried about are the things you don't already know to worry about, so it will be interesting to see if any of these themes play out the way so many expect. By the way, if I had to answer the same question myself, I think I would say that I expect a major increase in worldwide market volatility in 2007. Of course, I believe I said the same thing last year and we see how wrong I was about that. ;)

Members who are interested in reading how others responded to this question (entirely unedited) as well as their views on 1) whether there will be a recession in 2007, 2) whether the Fed will hike, lower, or keep interest rates steady, 3) the direction of oil prices, and 4) overall stance of members (bullish, bearish, neutral) should read today's trading notes.