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Monday Morning Point Guard


It's game on in the City of Critters...


March Madness Continues…

The breakout in the equity averages-the S&P closed above 1300 for the first time in almost five years-sparked towel tossing and bovine crossing as the ursine cried and the ink dried to end last week's action. Through pure technical eyes, it's hard to deny Hoofy his day in the sun-the financials act fantastic (yield curve be damned), breadth was snazzy, all sorts of sectors sported acne anew and bad news (General Motors (GM), Fannie Mae (FNM)) was soaked up by the Matador Bounty (a sure sign of underlying demand). Yes, in the immortal words of Garth Alger, it was "game on!" in the City of Critters.

The flies in the try? The semis, which have been known to act like a carrot to tech's horse, stunk up the house with a bloody crimson hue. Volume was there, although it was likely due to expiration more than some sorta demand validation. And, as long as we're talking about March expiry, we know that it may have played a large hand in the grand stand. Indeed, with last month's put protection six feet under, all eyes will spy S&P 1300 as the newfound floor that better hold if Hoofy hopes to avoid one of the nostier pop & drops of recent memory.

The Truth Hurts, If You Can find It…

Barron's discussed the disconnect between the DOW and Dubya, the former at five year highs and the latter at a paltry 37% (30 year lows). My good friend Jeff Saut reminded me, when I visited him in Florida , of an old saw on the Street-"if the President is in trouble, the market is in trouble." I fully subscribe to that thought, which leads us to ponder which side of that curious ride is lying? Could it be the averages, which represent actual supply/demand equilibrium? Or, perhaps, it's the leadership of our administration, which is dangerously dangling down a slippery slope?

I'll give the Bandits of the Beltway this-they're no dummies. They know that the stock market is the world's largest thermometer and have masked multiple inefficacies with bright, green headlights. Since the almighty bubble burst, we've seen historic fiscal and monetary stimuli aimed at improving the averages (read: headlines), debt and savings be damned. That same mindset-and the attendant conditioned sigh of relief--was in full effect after the towers fell, on the heels of the Iraqi invasion and once the latest election results were tallied. Coincidence? I'll leave that for you to decide. But for my money, I'll offer that the minxy marionette is being pulled by some serious strings.

We continue to hear about the impressive economic expansion but I'll offer that we can't view this dynamic in a one-dimensional manner. If the market is multi-linear, as we know it is, shouldn't we view the dew through equally observant lenses? Can we talk about growth without discussing the elasticity of debt? Is it fair to view the mainstay averages without mention of the basis of valuation (the dollar)? When do the ramifications of our increasingly isolationist efforts manifest in the price action or, worse, through non-dollar denominated disruptions? These are questions that keep me awake although I'm keenly aware that the buck may be passed to my kids, even if it's worth a heckuva lot less.

Some random (and less saucy) observations…

  • My 24 hour Oregon turnaround is in the rear-view and I would like to extend sincere gratitude to David Miller and his fine Entreprenerial Network for a fantastic retreat. I would also like to thank Minyans Dean and Pam Mendes for their outstanding hospitality Saturday night in Portland. Here's to great pooches and a man in the canoe!
  • Post expiration hangovers (read: the squaring of risk) typically last a few hours after the following opening bell. As such, I like to give the Minx a bit of time to sober up before taking a true read of the tea leaves.
  • Bird Flu and Mad Cows. It's like a critter revolution.
  • The bond market, which breathed a sigh of relief last week as yields on the ten year slipped from 4.8% to 4.67%, remains a focus as we edge through the asset class dance.
  • Keep General Electric $35 and Citigroup $48 on your radar as they're both pretty meaty resistance.
  • Congrats to Minyan John Barranco for entering the sweet sixteen on top of the Minyan March Madness Leader board.
  • Good luck Minyans and have a great first day of spring!

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Position in financials
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