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The Thrill of the 'Ville


"See" both sides of the trade and understand the agendas in play.


Strangers stopping strangers
Just to shake their hand
Everybody's playing in the heart of gold band
Heart of gold band.

(Grateful Dead)


First, let me say that I am truly glad to have found Minyanville. As a longtime Realmoney subscriber, I felt your input was sorely missed (as well as others who have left for various reasons). That being said, I have to say that the seduction of the negative argument has caused my leanings to be too cautious. Grantham, Gross, Fleckenstein, Faber, de Vaulx, Meisler, etc. have all influenced my negativity (and you, of course).

And then you see the clowns that are banging drums and hitting buttons in the bull arena, and it only re-enforces the position. If it's so bullish, why do they have to be so loud, brash and obnoxious about it? I've come to the conclusion that to know what could go wrong is important, but having a pragmatic view of who stands to win/lose by making it go right is probably more important. I think that in the face of horrible circumstances, people in positions of power will do whatever it takes to prevent the worst outcome from being realized.

For instance, a big point many in the 'Ville have brought to light is the huge reset in ARMs next year. This will happen, no question, but perhaps that is why the Fed has set things up for having an ability to aggressively lower rates next year? If they do that, won't that give all these people with ARMs an 'out' via refinancing?

How about the dollar crashing thesis? Aren't there countries out there motivated to prevent that outcome, if only to get past certain key events in the near future? A good example is China
. I don't think they want any major economic crisis to happen or have to be addressed until after the Olympics when they can show off how great they are. It's kind of a coming out party for them. So they will keep us happy; they'll artificially keep their economy going even if finished goods are stock piled, they'll keep a tight reign on North Korea's nut job. Is that too superficial or pragmatic of a thesis?

When one considers who is hurt by the U.S. suffering a huge economic downslide, it is apparent we probably have a world of enablers that will help us continue to over-consume, under-save, and stumble forward slowly, but positively. Are there things that might be too big to prevent from happening? Probably, but I don't think the rest of the world will let us fall on purpose until they completely bleed us of our value and have a replacement. Who would they have to despise and hate?

Anyhow, I'm still not really bullish, but I can't let the fear of the s*%t hitting the fan keep me from investing.

Best Regards,
Minyan Jason


You bring up alotta good points and, as it's a Freaky Friday flush with Beeks, I'm gonna chew through your spew with a few Random Thoughts:

  • We're glad you found us too. To date, the 'Ville has grown organically, with folks finding us through word of mouth. Those mouths now reside in 111 countries throughout the world and soon (through The Exchange), they'll be able to connect directly with each other. Which is nice.

  • "The seduction of the negative argument has caused my leanings to be too cautious?" With a conscious nod that we're sometimes too reticent to embrace the bull case, I'll note that we should view that dew in the proper context. First, with regard to time horizon, caution wasn't (isn't) necessarily wrong. The recent rally has been somewhat selective and the rest of the story remains untold. That's not a rationalization--I didn't capture what I coulda, woulda or otherwise shoulda--but capital preservation sometimes carries an opportunity cost. Remember, just because the market rallies doesn't mean that there isn't considerable risk.

  • As for the brazen bulls, I'm not sure that the high road leaves alotta room for discussion. I've never understood those who believe that their message is more important simply because they SCREAM LOUDER. That's not a dig on their directional bent--I know alotta sharp bovine who fly under the radar--but I agree that it saps credibility.

  • You hit the nail on the head. "See" both sides of the trade--the entire probability spectrum, from a massive rally to an outright melt--and understand the agendas in play. I'm not sure I've ever seen more "riding on the line" with regards to the market, from fortunes to futures to electoral followings.

  • Great perspective on the ARMs race. I'm in the rate cut camp myself (as a function of a slowing economy) but I didn't extrapolate that to the adjustable rate realm. Until now.

  • We touched on the dollar yesterday after I asked a sage buddy why the greenback has been firm in the face of a strong tape (which is counter-intuitive to my "asset class reflation vs. dollar devaluation" thesis). His view--and one that makes as much sense as any--is that the folks need to pay off debt, and they must do that with dollars (thus lending a bid). And yes, for the record, I think that IF foreign holders of our debt could unwind their positions without committing financial Hari Kari, they would have done so long ago.

  • Your last point touches on the "haves" and the "have nots" and yes, there will always be that influence (although I think the latter matter will get increasingly crowded). But I'll say this, my friend, nothing is "too big" to fail. I'm sure there were alotta folks in the Roman Empire who had a similar bent but, alas, that thought is Comicus.

Good luck today.


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