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Beg to Differ


Respect the psychological unknowns in front of Friday's feast!


Beginning to think that I'm wastin' time
I don't understand the things I do
The world outside looks so unkind
I'm countin' on you to
carry me through

(Dobie Gray)

Good morning and welcome back to verbal attack. Elmer arrived for his speech on the hill as the critters all watched from their perch in the 'Ville. "He's walking a rope," said Boo from the slope, "and he's pinning our fate on low rates and some hope!" You can't blame the bear for his constant frustration as everyone knows that there's latent inflation. Will the tables soon turn and adopt that concern or will Snapper's revenge cause more brown fur to burn? It's Hump Day anew so come one and come all as we ready ourselves for a Minxy new brawl!

The vernacular dance continued yesterday as our bespeckled Fed Chief tried to ease the collective mindset. While he clearly took a step in that direction, it remains to be seen if his flaccid vigilance will be rewarded. Further, a quiet storm is slowly brewing as the disconnect grows between what is and what is said to be. "We're the ones who are supposed to be living in a metaphorical town," said Sammy during a quiet dinner last night, "but sometimes it seems that Elmer is living in the fantasy world!"

The crux of our issue boils down to one dynamic: How many shekels are left in the Fed pockets and will they be able to continually feed the meter? Folks didn't mind a universal correlation when all the screens are green but for every action, there is an equal and opposite reaction. That is my fear with regard to the Carrie trade and, bigger picture, it's one of the reasons that I believe we'll see single digit multiples before this grizzly waves goodbye. Excess breeds excess, my friends, and we've lived high on the hog for quite some time (whatever that means).

While our path is clearly more important than the ultimate destination, I bring this up to balance the lopsided psyche that is ever-present. We've talked about the two-sided technical element (Hoofy is staring at stochastic buy signals while the NDX sits on the 200-day support) and the human condition is optimistic by nature. But the sad truth is that by the time the mechanism is understood by the mainstream media, it will likely be offered as an explanation rather than information.

The next two sessions will be all about posturing ahead of Friday's massive orange crop report. And while the jury prepares to vote with their wallets, the Minx will be weighing a new breed of Goldilocks. The Matador City committee now needs growth that isn't too strong (for fear of overheating) and isn't too light (stagflation anyone?). That's a far cry from the psychological backdrop that spurred the herd to outsized (and ursine cleansing) gains in 2003. The disconnect, if and when it chooses to emerge, is that sentiment measures and volatility guides still act as if we're in the throws of a bull market.

We power up the Hump Day pup to find a thataway Europe, weaker dollar, slightly firmer metals and stateside futures that look like a critter in headlights. The near-term dynamic is a swirling of rate worries, terror jitters, technical goosebumps and portfolio manicures (both ways). Wall of worry? That's a function of perspective--with volatility (read:fear) levels this low, fear seems like a buzzword rather than a course of action. Watch the bonds, breadth, leadership tells (SOX/BKX) and your back. Nobody said it was gonna be easy.

Good luck today.


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