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Banks Test the January Lows

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Potential for massive move still exists.

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  • If Apple and Nike merged, would the new company be called Nipple (AAPL) (NKE)?

  • It was a lot easier for me to hate the banks last summer when nobody else did. Still, if they break BKX 77.80 (January lows), it'll be a bad omen of the bulls.

  • As per Mr. Practical-and continuing a theme we discussed when the banks issued offering after offering-the Ambac (ABK) news is dilutive and deflationary.

  • That is in stark contrast to the socialization programs that are being bandied about in Fannie (FNM) and Freddie (FRE). No wonder we're confused.

  • Reading between the lines, it's pretty telling that the banks did NOT step up and ABK did NOT break the company in two. Not saying that was the solution, I'm simply peering through the smoke at the news that didn't break.


Meanwhile, as we dance along the credit chasm:


  • Carlyle Capital is sending fresh jitters through capital markets after failing to meet margin calls on its $21.7 billion portfolio.

  • JP Morgan (JPM) is saying that UBS (UBS) likely sold 25 billion Swiss francs ($24 billion) of holdings backed by Alt-A mortgages in a "fire sale" and raised their estimate of credit write-downs to 18.5 billion francs.

  • Remember that potential for a massive move? It not only still exists, it's stretched further than it was. Stay on your toes please.

  • Wow, silver can vote! That's nuts, particularly as I remember how stressed I was trading around a $7 long position.

  • I remember musing "I should just buy energy and metals, short tech and financials and open a taco stand in Costa Rica."

  • If I did that, three things would likely be a certainty right now. 1) I'd be a pretty snazzy surfer. 2) I'd be entirely more relaxed and 3) I'd likely have a lot more money.

  • That silver chart looks an awfully lot like a chart late last year. Just saying.

  • What happens when the Fed runs out of rate cut bullets?

  • Evidently my Bulgarian black belt trainer reads Minyanville now, as evidenced by the newfound zest in his right cross. Dude, I was kidding. Sorta. Don't piss me off.


Minyan Mailbag

Toddo,

The action in energy and metals supports the counter-trend Tuesday vibe. So you know, I still think real risk remains for commodities on a trading basis.

What do you think about energy and metals long term? I remember six months back you thought they were trends for the future. Do you still feel that way?

Thank you,
Minyan Bill


Minyan Bill,

Great question. Old school Minyans know that I've been on the metals and energy bandwagon since the end of 2003, offering that they'll "toss the leadership baton back and forth" on the upside.

Into year-end, I cooled on these groups-admittedly early and missing this last gasp higher-with thoughts that we would toggle from stagflation-hyperinflation into deflation. That hasn't happened yet as a function of a few developments, most notably the socialization of the marketplace. And there's no knowing for sure when that flip will switch, only that it likely will.

To your question, I do believe energy and metals will likely out-perform over the long-term on a relative basis. What that is, vis-a-vis other asset classes, is tough to know. My point was that they've prolly gotten a bit ahead of themselves in the short-term as investors stumble over themselves to gain exposure.

We've seen this movie before, I fear, so I'm just looking out.

Good luck,
Toddo

R.P.

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