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Random Thoughts

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Does anyone else get the sense that Hoofy and Boo are getting ready to lay it all on the line?

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  • And, seriously, aren't there extradition matters to consider before I head to the court house?

  • Did you know that the drillers were down 29% from their '06 highs (as of this morning)? As you might expect, sentiment has shifted dramatically since the summer, when it was in vogue to play these names. Hey--they were massive winners until then so, as is often the case, folks were proud to wear that badge.

    Why do I point this out? A few reasons. First, the sharpest corrections occur in the context of a bull market. This we know, so if you subscribe to the "secular winds" thesis, this latest cyclical downdraft must be viewed through the proper lens. If, on the other hand, you're in deflation station, the (likely) rally must be used to reduce exposure. Different strokes for different folks--please see 'em both.

    Second, I wanna extrapolate the sentiment then (in that sector) to the mindset now (for the broader tape). Just as these names could do no wrong--everything's funny when you're making money), a similar--if not yet as pervasive--mindset seems to be currently in play. As I said yesterday, while there might well be gas left in the bovine tank, further gains likely won't catch investors by surprise given the current media attention.

  • "One thing I have learned is that preservation of capital and steady returns, from my chair, are more important than being the most popular guy at a party." Professor Bennet Sedacca on today's Buzz.

  • We saw a gorilla buy 60,000 QQQQ Jan 44 calls this morning at .625 (that's 5/8 for old school Minyans). The dealer bought 2,000,000 QQQQ as a hedge and, from what I'm told, they were pretty easy to buy.

  • Wood Eye? I sure would! Mr. Dorsey continues to plant thought provoking seeds as he schools Minyans on behavioral finance.

  • Why has the dollar been strong in the face of a higher tape? That seems to fly in the face of my "asset class deflation vs. dollar devaluation" thesis and it's a question I posed to my good buddy last night. "People are buying dollars because they've gotta pay down debt," he opined, "and there's a lot of debt out there."

    Alright, fair enough, I suppose. But how does that "fit" with the broader asset class puzzle (bonds, stocks, commodities, currency). As I said to my friend, I can paint a bull and bear case for each of these classes on an individual basis. Collectively, however, something sure seems amiss as I try to assimilate the big picture.

  • Did you see how snazzy Brazil acted yesterday? Mexico (+1%) acts well today, so ya see it, and I continue to watch these as "risk aversion" (or lack thereof) proxies.

  • Minyan Eric forwarded us this chart a bit ago looking at the BKX/SPX Ratio:BKX/SPX Ratio, courtesy StockCharts.com "The last time this ratio cracked the up-trend line (back in early 2005) the BKX traded from 102 down to 92," he noted.

  • Does anyone else get the sense that Hoofy and Boo are getting ready to lay it all on the line?


R.P.

Positions in drillers, financials
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