Mailbag Grab Bag
Has anyone seen Debbie Downer?
You wrote yesterday morning: "For my part, and as long as we're talking tech in general and Wintel in particular, I've been eyeing Intel as it feels somewhat washed out." What indicates to you that a stock maybe "washed out?" Thanking you, Minyan Matt
It's a combination of a few elements. The stochastics were twisty oversold and, while that alone isn't an actionable catalyst, it's a variable to note in the context of price action and field position. In the case of Intel, I saw analysts cut numbers in droves (before the company missed) and it was intuitive (to these eyes) that something was wrong with the Mother Chip. When Intel officially "blew" on March 3rd, the downside reaction was relatively muted. Not surprising, given that the stock was already down 25% from its January high. As we know, a stock's reaction to the news (rather than the news itself) is often quite telling with regard to the underlying supply/demand dynamic.
In and of itself, that doesn't necessitate a compelling risk/reward, particularly since I sense a slew of number cuts still to come. However, given the wink from DeMark, coupled with uber-defined risk (above the 2004 double bottom at $19.65), I deemed it worthy of an upside schnitzel. I don't know if it's got the moxie to fill the upside gap between $23 and $26--Yahoo! has a similar chasm between $36 and $39 that remains in the rear-view--but, with fitty cent of risk and the above-mentioned ducks, I thought the quack count was compelling. We shall see...
Given the Morgan cut back in research, and earlier cuts in the technical analysis department - where do you advise a new or soon to be new - college grad to go if they are looking for a Wall Street career. In my day (long time ago) the research department seemed to be a good starting place. I know this is an open-ended question but it would be interesting to see what Minyans would do if they were just starting out. Be well, Minyan John.
I assume that this question was spawned from the Unavoidable Secession discussion in yesterday's opener. And it's one that I field often from eager students when speaking at universities. I know it's a stretch to presume that the brokerage industry has "issues" while trading at all-time highs but you need only talk to folks on the Street to feel the heat. In the interest of full disclosure and forthright honesty, my assessment of the financial stocks, to date, has been the most egregious misjudgment of my career. And I've got plenty of puts buried in my backyard to prove it. So please take these vibes with a grain of salt as they remain one man's humble opinion.
The genesis of my misstep was a failure to respect the effects of liquidity resulting from the historic fiscal and monetary stimuli. As a professional trader who's been in the pits for sixteen years--on the sell-side at Mother Morgan and on the buy side at Galleon and Cramer, Berkowitz--I've seen seismic shifts in the landscape. Whereas I used to pay six cents a share and wait five minutes for a fill, I'll now pay a penny and get immediate execution. It doesn't take a rocket scientist to calculate the margin squeeze on the trading side. Ditto the research arena, where the relative value added, while substantial at times, is difficult to monetize given the technological advances and regulatory clamps. So color me confused on the all-time highs, save the slew of M&A activity as a result of the sloshing mosh pit of cash out there.
With this said, I continue to believe that human capital will always have a place in the equation and hard work, perseverance and tenacity will reward those deserving of success. Unfortunately, and getting back to your question, there is no blanket answer regarding the best spot to start. It depends, in large part, on individual skill-sets and desires. I will simply advise this: choose a path that you're passionate about for at the end of the day, you gotta want it. If you don't, there'll always be someone younger and hungrier nipping at your heels.
Regarding your recent notes Sanofi Advantis and possible Ambien risk, I noticed today that if you Google "Ambien" the top sponsored-result is to join a possible class-action suit. Not sure if they are just fishing or if this is going to be a major push/gear-up by the legal community. My personal feelings of lawyers & suits like this aside, with pharma so hot/overbought, I keep wondering if even a hint of a lawsuit is going to be an issue to SNY. Take care, Minyan Tim
As discussed various times through the first few months of '06, I've liked (and continue to like) big pharma as relative winner. There is risk to the trade--as there is risk to all things trading--but I liked how "hated" they were to enter the year and have monitored the snazzy reverse dandruff that has triggered on the chart. I own some other big cap pharma names--not big, just some--so perhaps SNY is a good pair on the short side. Truth be told, I didn't "know" the name that well which is a big reason I didn't blindly bet on the sleep eating news. I learned a long time ago that, when in doubt, sit it out and do the work. Besides, I had a belly ache from the three pints of Ben & Jerry's I consumed at 3:00 AM.
Can you touch on the (big picture) subject of equity supply and demand vis a vis intermediate term direction for the markets? We've seen a growing M&A (reach out and touch someone), massive buybacks, some LBO's, and a ginourmnous war chest of private equity cash on stage left. The IPO market has been pretty slow in comparison. What level of equity demand "forces" stocks higher? Another question…have we ever had this phenomena as the Fed was "nearing" an end of rate hikes? Peace, Minyan Sully
You point out numerous valid points--which isn't surprising as I've known you to do so for many years. At the end of the day, supply/demand is the final arbiter of asset class prices. The dynamics you discussed above aren't a cause of liquidity, they are a result of it. As mentioned above, and despite the "tightening" vernacular we hear from Boom Boom, money continues to flow into the market, be it from our Fed or from foreigners. As long as that continues, well, it will continue to continue.
We often discuss the strains on the system and, to be honest, I often bite my tongue in the interest of balance. The truth is, we're mortgaging our future for current consumption on numerous levels. My sense is that, as we've evolved into an immediate gratification society, nobody wants to see the other side of th ride as long as the screens are green. Yes, we gotta make hay when the sun shines and I'm right there with you, making trades to take trades and playing both sides of the tape. However, and perhaps because of my growing sense of percolating pain, I try keep an eye on the shady side of the street.
With regards to the FOMC, I'm prolly the wrong person to ask. This rate "cycle" has yet to fret the equity set, which is curious considering that everyone is already eyeing the end of the hike. I've grown increasingly distrustful of the vernacular that flows through the financial wires, viewing it as jaw boning in an attempt to shape psychology more than an honest assessment of the economic landscape. We've been in the late innings for a mighty long time but, for what it's worth, I don't think our policy is being dictated by the Beltway Bandits anymore. Given our growing dependence on foreign capital, and their existing ownership of our debt, odds are that we'll remain more reactive than proactive with regard to policy. Or, at least that's how I see it.
Has anyone seen Debbie Downer?
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at email@example.com.
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