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Sea Change


Talk about a sore Fannie!


"The sea was angry that day, my friends - like an old man trying to send back soup in a deli. I got about fifty feet out and suddenly the great beast appeared before me. I tell you he was ten stories high if he was a foot! As if sensing my presence, he let out a great bellow. I said, "Easy, big fella!" And then, as I watched him struggling, I realized that something was obstructing its breathing. From where I was standing, I could see directly into the eye of the great fish."

--George Costanza, Seinfeld

Good morning and welcome back to the minxy rap. Yesterday's slide was a worldwide red ride and it left frazzled traders tongue tied and fried. When the dust settled down and the closing bell tolled, the global landscape was a sight to behold. "The bears have invaded the markets en masse," said Daisy the cow as she swallowed some grass, "and while I'm quite sure that this too shall pass, these now daily spanks are a pain in the ass!" Can Hoofy fight back with a strong upside push and lighten the load on his gal pal's red tush? Or is it now time for that overdue whoosh that will freak out the bulls and then turn 'em to mush? It's a spankin' new day with the critters de 'Ville so ready yourselves for a minxy new thrill!

The hinges on the door are startin' to buckle as we ready ourselves for the adventure du jour. It's not so much the stateside action--the Nazz actually acted like it was ready to rebel yesterday--but it's the global underpinnings themselves that are cause for concern. When we speak of Carrie and her deep rooted desires, it's important to note that she is an equal opportunity destroyer. It's all about liquidity, Minyans, and if the easy money is getting runny, the asset class morass will be all encompassing. In other words, stateside equities, bonds, Europe, Latin America, Asia, metals, commodities, eggrolls, doughnut holes, lost souls--it's all one trade and if it fades it'll blow like grenades and cause a cascade.

Despite the growing discomfort with the home team performance, we've actually held up quite well vs. the less liquid markets. I haven't heard one teletubbie mention the Latin American melts or their implications for U.S. financial institutions. Rates (and the specter of tighter money) are surely "a" reason for treason but what about the intricate maze of derivatives or the underpinning of debt that intertwines our financial system? And don't kid yourself--one thing has a LOT to do with the other. That is the "other side" of globalization and is exactly the reason why the big picture bubble is made up of a lot of smaller, yet equally toxic, bubbles.

I've spoken to a few of my sharper contacts and they're uniform in their view that Cisco (CSCO:NASD) will offer good news tonight. I've been listening to the Chambo chat for years now and he always puts on a happy face. Still, some smart cookies believe that he'll spark a tech trek that will be emboldened by continued optimism in forthcoming earnings releases. While that could happen--the VXO fear factor has risen by 50% in the last few weeks--I reminded them (and myself) that the primary metric is currently structural. Fundies always matter, mind you, but the most reassuring news also comes at or near market tops.

Granted, there's been alotta dark talk in certain circles about the potential for a "crash." While it would be inconsistent for me to discount that entirely (as the conditional elements are 'there'), I'm not so sure that the Minx will let the bears have it that easy. The more likely sequence of events is a burn, churn, spurn, learn and, if we're lucky, earn. There will be head fakes, false hope (both ways), empty promises (defaults), sheer frustration, highs, lows, angst and finally apathy. But that'll likely take years to see as the investing public learns the hard way the very lessons we should have learned in the first place.

The more important question you should be digesting is what to do when/if the market melts, rips, flat lines....whateva. I've been doing a bit of trading in the metals (relative "safety" play) and while I entered some of these positions with longer term horizons, I can't shake the feeling that the next grizzly will have an E-ticket. I've tightened up my risk parameters and while I continue to "trade around" a core, I'm not married to anything except discipline, my cats and perhaps that Twix bar over there.

We power up this morning to find a feeble bounce in Asia, a drifty (light volume) lift in Europe, a stronger dollar still, slightly pink metals and a whole heckuva lotta eyeballs. Now that the minxy mini-series has gotten everyone's attention, the critters will be looking for signs of traction, slippage, meltage or rippage. While there certainly remains the potential for an outright poop, I would "think" that the Minx retests the breakdown points above. As we'll be reading the script together, look for cues from the breadth, leadership sectors and the global asset classes. And when in doubt, sit it out Minyans--this is no time for blind bets.

Good luck today.

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