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Monday Morning Quarterback

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There are two sides to every trade and, often times, the bottom line will dictate the relative volume of the reasoning rhyme.

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Good morning and welcome back to the Columbus Shack. It's a quiet morning in the big City as bond traders sleep in, Yankees fans endure a moment of silence and the world watches for underground shrooms in Asia. On the heels of last week's minxy market records, the tape settled in and settled down on Friday for a well deserved rest. We know the levels of lore for bovine galore--namely S&P 1340 and BKX 114 (former resistance, current support)--and, on cue, the Matador Crowd held technical serve as we limped into the weekend.

Hoofy and Boo--the standoff!

There are two sides to every trade and, often times, the bottom line will dictate the relative volume of the reasoning rhyme. As such, and as we've come to expect, the bulls are standing tall as they paint this latest phase as an upside migration en route to a year-end performance driven panic. Liquidity is the absolute arbiter, they'll argue, and money continues to rotate among sectors in an orderly fashion. The reaction to news is more telling than the news itself, they'll correctly observe, and the path of least resistance is northbound.

The bears, for their part, will point to the inverted yield curve, narrow participation, compressed volatility and the eye-popping imbalances that continue to percolate under a seemingly calm surface. To them, the recent headlines serve only to reinforce that we're in the early stages of widespread denial and, as anyone trafficking in commodities will tell you, there is plenty of pain if you peel back the outer layer of the onion.

For my part, and with my coin, I continue to watch the CRB for important clues. The commodity proxy is off a buff 10% since it broke the five year uptrend and the equity realm has paid it no mind. I may be entirely off base with regard to my "asset class reflation vs. dollar devaluation" theme--it sure seems that way now--but perhaps we're simply caught in the chasm between inflation worries and the global slowdown. Some would call that Goldilocks. Others would offer that it's a huge opportunity to reposition portfolios.

Gimme that Greenback!

I offered some dollar vibes late Friday that may help us fit the macro puzzle together. With the DXY pressing up against the downtrend line from 2002, we must respect the potential that the dollar could have room to run. Why, you ask, could the greenback grab some, uh, green back? Maybe foreigners will scramble to pay (dollar denominated) debt, thereby chasing supply higher. IF (big if) that happens, it would seemingly play into the hands of the "asset class deflation" camp and, in turn, the current migration near CRB 300 would simply be working off the oversold condition as a function of time rather than price.

I'm not (currently) positioned that way--I'm long some energy and metal equity calls (January paper) vs. cheap and cheaper financial puts (March). I've been viewing this carnage in the "stuff" complex as a cyclical bear within a secular bull. Either way, I would have thought--and continue to think--that a Snapper swings by and, perhaps, triggers a run back to the multiyear trendline (CRB 330). That seems like a long-shot at present but the doubtful psychology makes it entirely more likely than it was when, say, everyone and their sister was sporting bling.

The Important Stuff--the Minyanville Community sets the stage:

We are officially opening the gates to the first annual MIM-CCA on December 1st, 2006 in NYC. The afternoon program, from 12-5 PM, will focus on financial themes for 2007, featuring the insights and foresight of Steve Galbraith, Jeffrey Saut, Stephanie Pomboy, John Succo , Steve Shobin, Bennet Sedacca , Greg Weldon, Scott Reamer, Phil Erlanger, Todd Harrison , Jeff Bernstein and Television's JeffMacke®. Uber-Minyan Michael Santoli will once again moderate the event.

In the evening, we will be honoring Trent Tucker, formerly of the NY Knicks, with the first annual "Ruby" award for outstanding achievement in creative education. Thus far, we've received RSVP's from many of Trent 's former teammates, including Patrick Ewing, Charles Oakley and John Starks, as well as from a few NY football Giants including Howard Cross. Space is limited so if you would like more information on how to lock your spot--or, if you or your firm has an interest in sponsoring this event--please let us know. This is 100% for the kids and it's the right way to ring in the New Year.

Good luck today.

R.P.

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