By Todd Harrison Feb 23, 2006 9:56 am
S&P 1295 is my hump du jour!
- So, Aunt Fannie finally fessed, offering that "grossly inadequate" past accounting wasn't consistent with the world according to GAAP. We now "know" they misused "unqualified and derelict" accounting to smooth earnings and maximize bonuses for top executives (I'm sure this is a massive shocker for old school Minyans). While most of the errors were already disclosed, the restatement may raise "additional matters." It is unclear, at this time, if Franklin Raines' golf game has suffered but the stock, for its part, is up sharply. Go figure.
- The tape is presently a tale of two charts. The S&P is knock, knock, knocking on multiyear highs (above S&P 1295) while the NDX is the definition of dandruff. One of these critters is bound to be bitter.
- After a rather frazzled Hump Day fray, Hoofy and Boo passed each other on their way to the closing bell and had some choice words. We caught the meat fo' the heat on yesterday's Buzz and, as there were some interesting tidbits involves, I thought Minyans might like to peruse their views.
Hey Boo, there's an old saying in my 'hood--"don't hate the player, hate the game." The same mechanism that served up serious coin in 2000 through 2002 for the ursine uglies has simply flipped the switch. That's not "right" or "wrong," it's just "what is." At least for now.
If I were to bake up a wish list of what I wanna see during a rally, I would tick off leadership, breadth, balance and technical confirmation. We're seeing that now---the banks, trannies and brokers are at all-time highs and the small-caps aren't far behind. And if the S's get through S&P 1295, we'll likely see another spate of technical buying.
I hear you on the caveats--there's dandruff in tech land and the semis have softened. But the ability to absorb "rolling rotations" and avoid "outright migrations" is a sign of strength, not weakness. There is risk--a ten handle VXO in this global landscape is an absolute disconnect--but it is a two-sided discussion.
And this you must manage if you hope to stay in the game long enough to capitalize on your views.
It MUST be a new Paradigm!
You know it's funny. For years I thought the thin line above your lip was a milk moustache but now I see that it's actually Kool-Aid! Not that there's anything wrong with that--we both know that price is the ultimate and unequivocal arbiter of financial opinion. When the screens are green, there are plenty of reasons to point to. And when they turn red, there will be equally acute insight assigned.
When Boom Boom Bernanke was fingered in October, a rally began predicated on the perception that he'll keep the tape afloat at all costs. That mindset has now manifested as the market gets its first glance at the new Fed Head. Inverted yield curve? No problemo. Isolationism? That's their issue. Helicopters? If we need 'em, sure. At whatever the cost and no matter the price, I'm the guy!
Toddo made a point in Ojai that bears repeating. To understand where we are, we must also recognize how we got here. I'll simply say this, Hoofy--enjoy it while it lasts. For the longer the bovine sit at the bar, the nastier the hangover will be. And if we don't take our fiscal medicine, our kids are gonna inherit a whole lotta headaches.
Make it to take it, define risk and don't let "wouldas, couldas or shouldas" dictate your profile. Ketchup and rallies will only mix for so long.
I opined yesterday that I wanted to buy Oakland real estate and short San Fran real estate against it. While I was somewhat excited by this newfound epiphany, others didn't share my enthusiasm. "I've been to Raider games with you, baby, and it's certainly not fit for a Queen." Maybe not, but I'm a Raider fan to the core--cut me, I'll bleed silver and black--so perhaps I'll table this honeydew discussion for a future date.
A morning note from one of my trusted sales traders: "Why is risk premium in the market so low? Although earnings season is behind us, you have the four largest central banks tightening money supply, increasing geopolitical risk in the Middle East, the looming reset of adjustable rate mortgages and other real estate associated risks. S&P implied vols are trading at extremely low levels suggesting mass complacency." I agree, friend, but you forget to list the inverted yield curve as an invisible risk.
Minyanville is a fiscal literacy platform and not a forum for political banter. With that said, I'll offer that I view myself as a "moderate independent," someone who views issues on their own merit and makes judgments consistent with those thoughts. I've admittedly been pushed to the left by our current administration--as I sense many of us have--but that doesn't mean I love my country any less. In fact, I could argue that it demonstrates a more proactive affection. I'm not a gang tackler, nor have I harped on the many missteps, mistruths and misinformation fed to us from above. But I gotta say, of all the blunders and blemishes, the proposal to turn our ports over to anyone other than US citizens is mind-boggling in its ineptitude.
Succofests have been a Minyanville mainstay since the critter mission began. The premise is simple enough--two buddies, a weekly Wednesday dinner and multiple threads of conversation that range from finance to friendship to psychology to theology to quantum physics to the non-linearity of time and yes, even sports. Last night, as we walked off a rather enjoyable meal, we digested the day and absorbed the takeaway. "Skin, soul and wisdom," one of us said as we walked through the street, "skin, soul and wisdom."
Good luck today.
No positions in stocks mentioned.
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