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The Eastern European Domino?


In an interwoven world, you're only as strong as your weakest link.


"There's no need for argument, there's no argument at all. And if you never hear from him, that just means he didn't call." --Van Morrison

We don't "do" revisionist history in 'Ville. In fact, if there's a tag line that aptly captures our content since we first launched in 2002. It's, "the financial news you need to know before you know you need it."

Yesterday on the Buzz & Banter, we posed the following stream of consciousness:

Let's see if this makes any sense...

1) Latvia becomes the first EU country to face a sovereign debt crisis after failing to sell a single bill at a $100 million treasury auction.

2) Fears begin to manifest that fresh storms will brew in Eastern Europe as capital flights test currency pegs.

3) Money flows into the U.S. Dollar as a safe haven (imagine that!).

4) Asset classes will trade opposite the greenback and it the dollar rises, equities will get tagged.

5) S&P 950 resistance looms large above.

6) If you were a bear-or a domino, for that matter-doesn't this train of thought make intuitive sense?

This morning, Reuters reported that Latvian Prime Minister Valdis Dombrovskis said Latvia must reach an agreement with the IMF and EU quickly and fears "a domino effect in the region to a certain extend justified." 5-year credit default swaps rose 45 basis points while its domino, er, neighbor to the south rose 30 bips in sympathy.

We're not data mining to support the 2009 "W" vibes offered last month. I'm less concerned with the destination we arrive at than the path that we take to get there. While most of the mainstream media reports what was, our intention is to provoke the necessary thought to help us understand what will be and why.

Old school Minyans will attest that through the years, we've laid in on the line seven ways till Sunday. We were pretty grizzly into all-time highs (yes, we were early) and made some brazenly bullish calls when the market dangled in the abyss. This isn't a victory lap or pat on the back-we're a humble bunch-it's simply context for the newbies in our community.

And I will again say, as I did in Vail in the summer of 2006:

As the CEO of Minyanville, I would love nothing more than to proclaim the dawn of a new economic expansion. That is clearly in all of our best interests and it would bode well for Hoofy and Boo as they continue to build a financial fitness franchise.

As a man who prides himself on being forthright, however, I find myself at an internal conundrum. My grandfather taught me that all we have is our name and our word and I take those words to heart.

I must remain honest at all costs-even if I'm wrong in my assumptions or assertions. If I can't stand here amongst our community surrounded by the people I love and trust, and say it like I see it, I am doing a disservice to everyone who has chosen to be a part of this family.

The Game Plan

As shared yesterday in real-time, I covered my negative bets into S&P 920 (they were initiated Monday and added to on Tuesday at S&P 950) as I sensed Hoofy would hold the fort on the first test of the 200-day moving average. Better lucky than smart, I suppose, and I enter today with a fresh head and a clean pad.

While my inclination is to fade (short) rallies, I'll take our journey one step at a time and key off our tealeaves, first and foremost of which is the dollar. If the greenback gets grabby, I'll bang with Boo like white on rice using S&P 950-ish as a backstop (drawn with a crayon, not a pencil).

The trick to this trade will be the sentiment shift away from, "We avoided Armageddon!" to, "The equity issuance is massively dilutive and the world has real issues." Psychology is amorphous so the best we can do is attempt to keep our fingers on the global pulse, define our risk and leave ample margin for error.

Seeing both sides (always), Hoofy is using S&P 920 as a bovine backstop (stops below), global central banks are cornered (respect, mon) and there was an underlying bid yesterday in the banks (Wells Fargo (WFC), Bank of America (BAC), JPMorgan (JPM), Goldman Sachs (GS)) and big beta (Apple (AAPL), Baidu (BIDU), Google (GOOG), Amazon (AMZN)). Respect-don't defer-to the price action, but see it nonetheless.

One step at a time as we continue to find our way.

Some Random Thoughts:

  • You'll never make as much as you could and always lose more than you should. That's just the way it is (some things will never change).

  • Hypothetically speaking, if you were having a Woodstock themed 40th birthday Hippie-fest, would you go with Jim Morrison or Jimi Hendrix?

  • Proactive patience always seems to prove profitable.

  • Yes, the Intel (INTC) acquisition of Wind River is on the margin bullish as M&A activity picks up.

  • And the big bid in biotech yesterday (along with the big brain on Brad)?

  • Shifting gears-and Brads-could you really blame him?

  • If you're not mandated to trade every day, why would you?

  • Given our longstanding vibes about the importance of S&P 950, is a heretofore high tick at S&P 949.49 entirely too cute?

  • Are you trading to win or trading "not to lose?"

  • Are you letting your first sale be your worst sale?

  • How many bulls are channeling John Candy right now?

  • Have you turned your Mini-Minyans on to Minyanland to teach them earning, spending, saving and giving, joining the 430,000 other children on the critter adventure?

  • While my ENT doctor would punch me in the (other) ear if he read this, the Minyanship will be gathering in force tonight at The Red Lion in NYC at 9:00 PM to celebrate the birthdays of MV CMO Charlie Mangano and MV COO Tom Eggers. While the Stones and Petty will be the tunes of choice, I can't help but think that they'll both be vibing Neil! Feel free to swing by and say hi-they'll be the pair with the walkers!

  • Have a snazzy day, Minyans, and remember-profitability begins within.


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