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Roadside Bars


The thought of dancing alone is a major bummer!


Good morning and welcome back to the shakin' shack! Boo is huffin' and puffin' and playing his hand as we ready ourselves for a minxy new stand. After several new blows and political prose, the ursine attack has arose from their doze. "Keep sleeping, young Hoofs, close your eyes and pretend," said the bear without care to his large bovine friend, "the very same things that you can't comprehend will soon bury your butt in a crimson downtrend!" Does Boo have the juice to tighten the noose or is he walking anew into further abuse? It's Thursday, my friends so sit up and get pumped as we're already past the meat of the hump!

Things have started to get interesting in the city of critters as we dive into the backside muck. The impermeable recovery--you know, the one that HAD to last through the election--is officially being called out by corporate America. While Wal-Mart (WMT:NYSE), Target (TGT:NYSE), Gen'l Motors (GM:NYSE) and Wamu (WM:NYSE) coughed up recently, Yahoo! (YHOO:NASD), Seibel (SEBL:NASD), PeopleSoft (PSFT:NASD) and Bumkus (BMC:NYSE) have sung a similar swoon. While it may be entirely too early to sow the crimson earth, investors are starting to take heed of the seeds that have suddenly littered the landscape.

On top of the fundamental farmers, we've witnessed an interesting twist down on the beltway. While I remain independently minded--dare I say politically confused--a specter of uncertainty has re-emerged in Washington. The election was Dubya's to lose as the Minx danced (on steroids) through 2003. Then, as Iraq muddied, it felt as if Kerry had Bush on the ropes and exposed for the knockout. But instead of swinging, the Democratic hopeful hushed up and allowed our current administration time to recover. Now, by coupling the two leading candidates, investors are starting to realize that we could have a dogfight on our hands (recent polls find the Kerry/Edward ticket five to nine points in front of Bush).

For purposes of trading, it doesn't really matter what our political affiliation is. All we need to know is what the collective perception is and how dynamic events juxtapose against that mindset. What matters now is that the Minx is more uncertain and uncertainty rarely bodes well for Hoofy. It's apropos, I suppose, that our antennae adjust to this frequency as the political (and, by extension, geopolitical) backdrop will color investment decisions. These elements, powerful in their own right, have potentially exacerbated effects as a function of the lopsided (bullish) sentiment, hawkish rate debates and leveraged (and crowded) customer base.

I've long opined that a dollar denominated decline (and/or a crisis in confidence) will play the part of prick part deux. I don't know if the recent break (DXY 88) is an intuitive continuation of that drip (it's a prolonged and painful process) but the time horizon of that thesis is longer-term in nature. I offer this as both a point of clarification and as a reminder that risk is three dimensional and must be viewed as a function of both time and price. Professor Fleckenstein wrote a masterful piece on the bear case last night. He and I differ in certain aspects of the prickly process, but most of our circles overlap nicely.

With that said, and as I always try to self-temper, I will share a story that lends the proper perspective. In November of 2003, Brian Reynolds, Scott Pollack and I were eating at Elio's on the upper east side of Manhattan. The three of us have been friends for a long time and were enjoying a bottle of Brunello with our schnitzel. The S&P had squeezed the bejezus outa me--memories!--and it looked like the tape was about to roll over. Brian offered that the mountain of debt (that had been rolled out to 2006 and 2007) would (literally) "buy the market some time." That was almost eight months (and 80 S&P handles) ago and while the landscape is forever changing, the lesson of patience is one I continue to carry forward. Timing, as the saying goes, is everything.

We power up this minxy pup to find Europe marginally lower (not as bad as I would have thought), the dollar nibblin' for some green back, the metals a touch higher (still below recent highs) and the stateside futes southbound. The spate of fundamental letdowns may be simple indigestion before a hearty and healthy meal but if-monster if-earnings come in lame, Hoofy will be dancing Stag--if you catch my drift.

Good luck today.

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