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Monday Morning Quarterback


I tend to view lower prices as a good thing when looking for merchandise.


Last dance with Mary Jane
One more time to kill the pain
I feel summer creepin' in and I'm
Tired of this trade again.

(Tom Petty)

Trading Places…

Good morning and welcome back to the trippy track. Last week was a freak in the flickering ticks as traders continued to get their fix. On the heels of global rate hikes and hawkish talk from Big Ben, markets around the world took it on the chin and looked ready to go down for the count. They were on the ropes Thursday, absorbing body blows and hooks to the head, before Hoofy delivered an upper cut of his own that caught the cocky bears looking the wrong way. Our brave bovine, cheered by the freshly enthused crowd, tried to capitalize on that momentum but his lethargic legs and weak knees were too tired to turn the tide.

Anxious emotions littered the Friday landscape as the two sides made their respective cases. Over in Matador City , the bulls were pointing to the high volume upside reversal, a short-term spike in volatility measures and technical levels that were underfoot still. On the other side of the trade, Boo is quietly confident as he watches the Fed try to maneuver itself out of a box that includes higher costs of capital, weaker growth, historic debt and foreign dependency. The ursine are also quick to note that the S&P rallied directly back to its 200-day moving average, former support and current resistance, and has thus far failed to mount that technical hump.

From my perch, I've been active as I try to find my way and make some hay. After paring both sides of my book early last week, I bought into the teeth of the supply on Thursday and parceled out some overage into the subsequent lift. I also added a spate of financial puts, despite their continued ability to hold BKX 108, to balance some longer-term holdings in the metal and energy sectors. The commodity space has been a bipolar stroller, flipping from over-loved to uber-hated after a short and painful month, but this is where I wanna be with my cores. And so it's said, I tend to view lower prices as a good thing when looking for merchandise. That might sound intuitive but trust me, there's a whole lotta mo'mo players who view the dew the other way.

Speaking of crimson commodities…

By now, you're likely aware that there has, in fact, been some blood in the Street that's up to our knees. Ospraie Capital Management recently closed their commodity doors after a bet on copper went wildly awry. Minyans may remember that we smelled smoke in this complex back in April (opining that copper was the likely culprit) and, as is often the case, it took a bit of time for the alarms to ring and the crowd to pour out to the Street.

While Ospraie only had $250 million in that particular fund, we're left to wonder if there was collateral damage to her friends and to her neighbors. Much like a naughty boy who stamps out the ashes of a self-induced fire, I can't help but cast an innocent eye to the sky in an effort to identify the errant ember sailing in the breeze. Remember, in a derivative-laden financial fabric, a few leveraged dollars can go a mighty long way. And much like the proverbial pebble in the pond, the waves sometimes take their own sweet time to abate. Is this actionable? Nah, but it's certainly something to keep in mind as we try to find our way to more traditional tapes.

This may or may not manifest into further fesses of financial messes. But with quarter-end a few short weeks away, you can bet that a few nervous fund managers are dreading the pen and paper that awaits. Gaming invisible catalysts is always a dangerous game but I will offer, with relative certainty, that fund managers are gripping the handlebars a bit tighter than they usually do. That will likely lead to emotional movements in the financial markets and add a dose of uncertainty to an already uncertain tape. Factor these influences into your upcoming risk profiles, Minyans, and understand that there will be lots of reasons we fail to understand as June expiration knocks on our door.

Odds and End...

  • Minyan Michael Santoli, in his always excellent Barron's column, spoke about the finger of blame that is pointing at Big Ben Bernanke. As I said last week, we can't shoot the messenger for simply speaking the truth and I, for one, was happy to hear some forthright vibes coming out of the FOMC. The truth of the matter is that Ben, along with the rest of us, will bear the brunt of Mr. Greenspan's juggling bubbles for years to come and pretending they don't exist isn't an intelligent option. It's not gonna be easy but the longer we push out the bar tab, the nastier the subsequent hangover will be.

  • The yield curve quietly inverted last week, sans fanfare or coverage in the mainstream financial media. While many would like to believe that it's different this time, we would be wise to hear the message that the market speaks. Again, for the many new Minyans in our midst, I humbly believe that we've entered into Stagflation*, which is to say that we've got simultaneous inflation and deflation that bucks conventional wisdom or historic definition. Things we need cost more, things we want cost less and pricing power, as a function of a digital world, is being squeezed in virtually every industry. Conundrum? You betcha!

  • It promises to be a busy week on the catalyst calendar as a handful of brokerage stocks paint the tape. Lehman (already out), Goldman (Tuesday) and Bear Stearns (Thursday) will tell the tale of the tape and, as they've been leaders on both sides of the ride, Minyans would be wise to keep a watchful eye on this group. After 16 years of playing these names, I will offer that they're tricky traders on the heels of headline numbers. "Blow-out" numbers are widely expected and, as such, I would caution ye faithful not to trade on the rear-view earnings. With all that's been discussed in this column alone, there are plenty of reasons to price these stocks for what's to come rather than the water under the bridge.

And finally, some Minyan Housekeeping…

  • Buzz 2.0 is edging ever-so-closer to reality as we finish up the beta testing process. It's exciting on a number of levels and we hope to roll it out within a week. This will alleviate many of the technical issues that have emerged as we've grown the Minyan audience over the last year. Alas, "growing pains" aren't a viable excuse and we won't stop until the Minyan experience is consistent with our admittedly lofty internal expectations. Be excited. Be very, very excited.

  • Minyans in the Mountains III is less that two months away! We've still got a spate of rooms left for the Vail mingle and, as I know alotta Minyans plan on coming but haven't registered, I want to keep it on the radar. This is more than a financial retreat-it's an opportunity to build friendships, join networks and arm yourself with the financial acumen needed to succeed. Come single or bring your family-it really doesn't matter-as we're going to be a "collective one" across the board.

Thanks kindly, my friends, and let's start this week with some serious jingle in our jeans. I'll see you on the Buzz...


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