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Weight of the World


S's over N's.


Catch a cannonball now to take me down the line
My bag is sinking low and I do believe it's time
To get back to Miss Fanny, you know she's the only one
Who sent me here with her regards for everyone

(The Band)

The hump day cruise is a bit of a snooze despite a hard fight on the back of the news. Earnings are always "sensory overload" but this session is particularly A.D.D. In addition to fundamental flurry, we had a bevy of Beeks (economic data), a Fannie finagle (dividend cut), structural concerns (General Motor (GM) spreads) and, of course, the requisite Fed jaw-boning. Talk about a mental Minyan--man, there is a LOT on our collective plate right now.

Rather than trying to digest it all at the same time (a common mistake in our business), its important to view the tape through the proper lenses. First and foremost, there is the issue of time horizon and making absolutely certain that our risk profile is properly juxtaposed. There are variables that matter more to the near-term (breadth, price action, levels) and others that have longer-term implications (structural, volatility fabric, twin deficits). Playing both ends of the curve isn't mutually exclusive but knowing which end is "up" is half the battle.

For my part, I added one leg in my metaphorical bull costume yesterday morning (25% conviction on the long side) and hopped home with the same posture. I'm still "there" although, as a function of the bunk breadth in the Nazz and steady slippage in the semis, I "rolled up" my stop level (again) to tighten my risk profile. This was a pure schnitzel (trading try) in the context of a bigger picture bearish bent. And while there may be more upside in our midst (through expiration?), I'm not willing to press my bet by buying dips.

I've been pinging with Fleck a bit regarding the Fannie dividend cut and we both agree that the relative apathy is interesting. The bears--present company included--have been absolutely flummoxed by this stock over the years and many have already given up (trying to play the short side). Indeed, if I had a dollar for every $70 strike put that has been buried in my back yard, I would be a very wealthy man. Perhaps Fannie is a financial cancer (rather than a car crash) but paying for that privilege has been a costly endeavor.

I've got a lunch meeting ready to step in so I've gotta keep this missive short and sweet. My lone leg is twitching a bit as the S's probe my stop level (S&P 1189ish) but--as it stands--Hoofy is hangin' onto Cliff's Branch. As we've already "rolled" our stop up twice, the risk is that we punt the position for only a marginal gain. That, my friends, is what we call an advantageous risk/reward profile. If we can identify those set-ups and be patient in our approach, the world may not seem so ominous after all.

As always, I hope this finds you well.


position in fnm

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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