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The Golden Handcuffs

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Strategy is our strength and not disaster.

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You can fall for chains of silver
You can fall for chains of gold
You can fall for pretty strangers
And the promises they hold


(Dire Straits)


Good morning and welcome back to the whips and change. Yesterday's sputtering funk had more head fakes than Penny Hardaway but, when it was all said and done, equities dribbled quietly into the close. It was a non-event for the Minx, although Hoofs won't complain on the heels of Friday's gain. Can the bovine beast resume his upside feast or will the ursine clan make another spunky stand? It's a new day of giggles and wiggles, Minyans, so sharpen those pencils and let's get to work!

Monday's muck was a textbook example of flighty plight of a traders flight. At various times throughout the session, the tape appeared to be setting up for something explosive. However, the blips, dips, slips and mini-rips amounted to nuttin, honey, and the reactive types trudged home with a dollop of whipped cream. Indeed, for a nothing day, there sure was a fair amount of frustration in the street as those trying to squeeze water from the stone ended up at the Hard Rock Cafe.

There's not much new to report outside of the continued meltage in bond land. Rates won't matter--until they do--but Elmer's best efforts have begun to backfire. The modus operandi of the Fed was to squeeze liquidity back into the equity market. If real rates approach zilch, they figure, money will migrate back into equities as an investment of last resort. A funny thing happened on the way to ground zero, however, and rates have backed up faster than Jack Byrne's guest room toilet. If the Minx follows the path of Mr. Jinx, as it's been doing, the ing)">schvitz has only begun to hit the fan.

Last night, while sharing a seltza with Steve Galbraith and the Morgan Stanley summer interns, we discussed the future of our business. Before long, I found myself engrossed in the throws of a minxy conversation and, as per my nature, I laid it on the line for these fellows and felletes. If there's one thing I pride myself on--something more important than being right or wrong--it's being honest in my communication. I spoke--we spoke--about the bubble, the relative expectations, the basis of comparison, the over-capacity, the potential for a downside dislocation and the importance of aligning one's risk profile and time horizon.

I'm admittedly more bearish than most--it's a posture I assumed in the spring of 2000 and I've maintained that big picture bias for better or for worse. We also spoke candidly about the trading dynamic and how anybody worth their salt has taken a fair share of lumps. I've been too cautious, I explained, and Steve opined (correctly) that you can only be wrong for so long in this business. It's the nature of the beast, and a function of the desire for immediate gratification. Such is life on Wall Street, where you're only as good as your last trade, and the remaining bears are feeling the heat.

The trillion dollar question then becomes: where do we go from here and, more importantly, is it too late to migrate from the dark side? I would have no problem donning horns and joining the stampede if I truly believed that we were in the early innings of a new bull market. Unfortunately--or, fortunately depending on the future path of Minxdom--I don't subscribe to that view. I believe we're in a bullish phase nestled within a much bigger (and longer) bear cycle. And within that context, I think we're in both the late and early innings, respectively.

As we approach these thin and drifty sessions, I'm respecting the potential for a strong wind to blow the tape either way. The Minx seemingly WANTS to try and break out (first through S&P 1000 before trying S&P 1015) but therein lies our dilemma. Trading 101 dictates that the relationship between risk and reward and, without one, there cannot be the other. That's why I'm playing uber-tight and using the technical metric as a framework with which to trade. I am a bear who loves to identify edges. In a quiet, emotionally charged environment--sitting within a trading range--those edges are as sharp as a marble.

In Minyanville news, and in accordance with the critter labor laws, the menagerie has been furiously working behind the scenes on the triple secret announcement. I had a long meeting with them last night and expressed my agita regarding the timing of the release. After a spirited discussion, the room quieted and they looked at each other knowingly. At that moment, Daisy reached next to Hoofy, grabbed his briefcase, walked to my desk and opened it for my viewing pleasure. The golden glow blinded me briefly but when I peered through the brilliance, I saw one of the most beautiful things I've ever experienced. When will the Minyans get a sneak peek? Soon....very soon.

Good luck today.

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