Good morning and welcome back to the flickering pack. For reasons that will become obvious at the end of this column, I’ve shifted my morning missive a bit. I’ll start by sharing the human side of the Bear Stearns (BSC) saga, follow with thoughts from yesterday’s Buzz and finish with some personal vibes that means a great deal to me.
The Other Side of Socialization
I saw a dear friend last night that spent the last 12 years as a senior manager at Bear Stearns. We go way back a long way and he’s salt of the earth. We toasted the birth of his new child and spent the rest of the conversation weighing his options in the wake of Monday’s mind-boggling deal.
He is one of several close friends I have at Bear, all of which have seen their net worth evaporate. You can say what you want about the deal - the price in which it transacted, what would have happened if it didn’t, the inflection point it created and potential re-pricing are all hot topics on the Street. But this thought isn’t about that. It’s about the human toll it has taken and the lives it has ruined.
We’ve spoken about the State of the Art for many years and the road to ruin shouldn’t be a shocker for Minyans. Writing about it and experiencing it are two different dynamics, however, and I’m moved by the magnitude of sadness I’m seeing. Most of the folks at Bear Stearns are good, honest, hard-working people with families that were simply chasing their dream. Those are now shattered, a by-product of risk mismanagement by a select few.
As Bear Stearns becomes a historic footnote as the maiden in the volcano, I will ask that you remember the human frailty involved. Most of the recent Wall Street conversations have centered on trading opportunities and market cusps. While that certainly has a place in capitalist commentary, the human-interest angle needs to be respected.
This I know for I was once there. Energy comes full circle and, as my grandfather used to say, what goes around comes around. If you’re in a position to help those in need, please take the time to do so. You never know when you’ll be on the other side of that trade.
The sharpest rallies occur in the context of a bear market. While one of these pups is bound to stick, it’s worth remembering the series of lower highs in the S&P as we maintain some broader based perspective.
Click to enlarge
That’s what I meant yesterday when I drew the distinction between “a” low and “the” low. This rally could have legs but I don’t believe we’ve seen the worst. The question I'm wrestling with is just how long it will appear that we have.
Minyan March Madness
Please take a moment to fill out your Ben Bernanke's "Bank Shot" Bracket. Someone will win two tickets to the NCAA championship game in San Antonio (air fare not included) and we’ll have more details tomorrow.
Further to that, we’ll once again be hosting the Minyan March Madness Brackets (password: Minyans). The winner will receive some snazzy schwag (and bragging rights) while the “non-winners” (there are no losers) will have the right—but not the obligation—to make a donation of their choice to my grandfather’s most worthy cause.
During these trying times, we must remember to give back when we can (and only if we can). That's the Minyan way and, on behalf of Ruby, I offer you one of his patented winks. ;-)
The following Buzzes appeared in succession yesterday afternoon on the Buzz & Banter when crude was trading near $110 and the Federal Reserve was about to hit the tape.
Drillers and Fillers
I just asked Pep "Do you think it's too early to get back into some driller puts?" He offered that he was thinking the same. I said "The last thing we wanna do is go back to the well once too often but that doesn't mean we can't start a position and add into strength, right?"
I still believe that crude trades par ($100) and that'll pull down this group for a pure trade. With that in mind, I slipped into a 25% put position in Schlumberger (SLB) with an eye towards resistance ($88-90) and the thought that if Big Ben chimes lighter than expected, the dollar could lift and the mood could shift.
Three Quarters for Yer Orders!
The FOMC hits the tape and the tape gets hit for a quick 100 points. What did I do? You mean, other than trading and writing as fast as I can, Vitamin Water dripping down my chin the entire time?
I pared my shorts (Schlumberger (SLB) and Baidu (BIDU)), both of which quickly got clipped by a coupla bones, and scanned for stocks to buy. I didn't get that chance--yet--but I wanted to give you an update while I can.
WATCH THE DOLLAR. If it catches a sustained bid (it popped 30 bips), asset classes could see a deeper pullback.
My goodness, you really gotta be quick. I used to think that was a bad thing. My ex called me a bad lover and I never understood how she could tell in thirty seconds.
The Risk Fix
Here's what I'm thinking, doing and seeing (not necessarily in that order).
I sold my Baidu (BIDU) puts (although something doesn't smell right over there) and nibbled on some Apple (AAPL) calls (pure trade for an end-of-day push). I've set my stop on the Newton special below $128.65 (the daily low and yesterday's high).
My pad is pretty concentrated, which is entirely alright as I continue to build the biggest position on my sheets--Minyanville.
As always, I hope this finds you well.
Pucker up Buttercup!
- You know those Schlumberger (SLB) puts I bought into the FOMC and pared during the pullback? I'm buying 'em back into this rippage. Especially with the dollar up on the day (and conscious that the dollar/asset class thang is a big picture bent).
- I'm also peeling out of some Apple (AAPL) calls as a function of discipline. As Gordon Gekko said, "If a fool and his money..."
- Baidu (BIDU) still trades sick. I'm not there anymore but any slippage into the close (which I don't foresee) will pound this puppy.
- Fast forward six months. Will the S&P look like a classic double bottom?
- Finally, if you're bored--yeah, right!--here's one of the clips from last night regarding my top five power players on the Street.
- I think I'm back to Winky Wright, Yo. I'm gonna carry home some SLB puts, Schering Plough (SGP) calls and a handful of situations. Other than that, I'm long powder, short chowder and ready for the three day respite!
- Remember Monday when we offered that crashes don't occur when everyone is looking for one? I would venture to say that a lot fewer folks are looking for one now. That's not to say I'm looking for one, per se, I'm just offering a bit of perspective as you eyeball your overnight risk profile.
- For those of you who missed me tossing Cody Willard when he tried to slap a sleeper hold on me during Friday night's Happy Hour in South Beach, a little birdie tells me that they're gonna replay it on tonight's show. I haven't seen it and, to be honest, I'm not sure I wanna!
- Rip it, Stevie!
- I respect the potential for further upside. At the same time, the combination of 1) the sharpest rallies occurring in the context of a bear market and 2) it being Turnaround Tuesday has me eyeing Winky once again. Hit it to quit it. Then hit me again Ike, and this time put some stank on it!
- I'm taking the "second oompha" slab of Apple (AAPL) off into the close along with some Schering (SGP) (+5%). I'll lay my weary head to bed tonight with some Schlumberger (SLB) puts and a handful of long side situations in my pockets. OK, I don't sleep with pockets but work with me, I've been up since God's hour that's prolly a bad visual at this point.
- If you're diggin' the 'Ville, please tell your friends as that's how our community grows. And if you're able--only if you're able--perhaps you can give a bit back to the kids. That's how we roll in these parts and we rely on ye faithful to grease thy wheels.
And Finally, On a Personal Note
Last night, after 13 years of unconditional love, consistent affection and tremendous spirit the youngest of my two cats—Zoë—passed away. I knew something was amiss when she didn’t greet me at the door as she has each and every day I’ve had her. I found her curled in a corner that she never previously occupied. She knew it was her time and she passed peacefully.
They say animals assume the personality of their owners. It is my hope that, through the years, I’ve absorbed some of her traits. I got her when she was less than two months old and immediately knew there was a problem. She wasn’t eating, she hid under my bed and barely moved at all.
After many veterinary visits and thousands of dollars, the doctor told me she had leukemia and the prognosis was grim. “Your cat's going to die in a matter of weeks, if not days,” he said, “We should put her down.” “No,” I said, “If she’s going to die, I’m going to take her home and spend what time we have left together."
She never grew—she was all of eight pounds dripping wet—but she refused to give up. The doctor would later call her "the miracle cat" and never had a valid medical reason why she lived. Not only did she survive, she thrived.
She raced around my apartment bouncing off walls and turning off light switches.
She found anything new in the apartment and immediately sat on it.
She turned the bathtub into her own personal playground.
There may be people wondering why I’m wasting their time with a story about a silly cat. I will respond by saying that this silly cat was an extension of my life. She comforted me after my grandfather passed. She slept on my chest in the months after 9/11. She made me smile and laugh and enjoy moments that I would otherwise have taken for granted.
I will ask for latitude on the content today as I was up all night disposing of her remains and saying my final goodbyes. I understand these are the big leagues and we play in pain and I plan to do just that. I will simply share that I haven’t slept and that should be factored into the communication equation.
Rest in Peace, Zoëbird. You will be missed by many and loved forever.
Position in BIDU and SLB.