At the end of trading on Friday, March 20, 2009, the Best Portfolio is ahead of the benchmark S&P500 by 4.05% after only seven weeks of comparison. That is largely because our strategy of capturing option premiums as well as some dividends has boosted our performance in a tough market. We also got the benefit of the last two weeks’ surge in resource stocks, especially FCX and Quadra Mining, a couple of copper names with a gold kicker. We have nice gains in AMAT, WFR, BRCM and SVM, a Canadian silver producer. All the rest of the Portfolio is either around even, down somewhat, or a resource stock. Our decision to add to HL is paying off, as the stock recovered nicely from a February bear raid. We re-bought at $1.77 and now, with both silver and gold rising steadily, HL has climbed back to $2.19. The news is not so good for the STEI repurchase, but we are very confident that this name will soon rise from the dead and add vigor to our Portfolio. We added more STEI at $2.85 after a huge plunge prompted by a scare and rumor campaign that the Trusts would implode along with the cratering market – but STEI has a solid business, and we are sanguine on stocks in general, so we recommend buying more at the present $2.47 price – a steal. The performance in FCX has been quite strong, but not really unexpected. In retrospect, we should have made this a larger initial position, but we also had big holdings in QUA (Quadra Mining) as well as several other mining names like ANR, BTU, CLF and RIO. There was a concern that the Portfolio might be top-heavy in mining names, so for the sake of staying balanced we chose some medical and tech to round things out. FCX is a fine company that was severely punished due to its industry classification, not its performance. In fact, I daresay FCX is the best of the miners, with an ace CEO who seems to understand mining, as well as prudent hedging and how to read a balance sheet. FCX saw what was happening in November, and promptly shut down some mines, deferred capex and/or expansion plans at other properties, and axed its dividend. It will be around, and in strong position, when other mining outfits are being picked over by the liquidators and the vulture investors. Our covered calls were written against the stock on 2/6/09, just days after the Portfolio was first published, and have now been assigned, meaning that we lose the shares. The stark dearth of competent executive talent in the mining industry is probably testament to the insanely misguided mission of the B-Schools, that churn out more gamblers and financial tricksters than capable CEOs who actually want to run a company, and are also qualified to do so. FCX is lucky to have Richard Adkerson at the helm, and it’s doubly nice to see a CEO actually EARN his paycheck – a very rare sight in corporate America these days (or for the last twenty years). We are also very glad to have stayed off the “financials” roller coaster, which seems utterly unpredictable and likely to remain so. The crazy swings in bank stocks that are clearly busted if current accounting rules are enforced is fun to watch, but could be hazardous to your wealth. We await developments as to whether FASB will cater to the screaming mob, or defend its ground despite the market turmoil caused by MTM’s unintended consequences. Back to the copper story – the red metal has leaped 24% on the April contract (Nymex) in just one month, based on increased Chinese buying, global demand that seems steadier than the doom & gloom crowd had forecasted, and a general sense that stocks have been pounded down so far that the worst is over, and a large upswing is ready to emerge. Last week, we had a couple of strong market advances, and tomorrow Herr Geithner once again is on the line to show us something, anything that looks like a plan to address the credit crisis and restore confidence in the “system”, whatever that is. Frankly, I would call what went on over the past few years more of an organized crime experiment, and a RICO investigation waiting to happen – but for now, the Big Boys in Washington D.C. are still sticking with “financial system” as a way to describe the daily events on Wall Street, London, and trading desks around the world. I plan to file an update on the Best Portfolio at the end of Q1, i.e. the March 31st close. I will figure the dividends that the SP500 would have received over the first two months of the Portfolio, and factor those in to the comparison. I also may make a few changes in composition, especially if the current low prices for MLPs are still at these levels in ten days. There are also a few tempting retail turnaround plays that I am personally invested in, and will likely feature in coming weeks. We will need to replace FCX next week, and I will likely add a retailer, a coal name, and/or an MLP depending on price. The next installment will show the new positions.

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