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Random Thoughts: The Crying Game - Financials in Drag

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Keep aim on companies that are not what they seem.

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Editor's Note: The following was posted in real time on our premium Buzz & Banter. It's being shared here for the benefit of the Minyanville community. See also Where We Are and Where We're Going and Welcome to the Grand Illusion.


  • Does the positive divergence by the financials---the BKX is green--mean anything given that the construct of capitalism is broken?


  • In addition to General Electric (GE) (-8%), keep tabs on IBM (IBM) (-6%), Ford (F) (-9%) and Daimler (-10%). Financials in drag (companies with finance-based operations) are coming into the crosshairs.

  • If they suspend of shift "mark-to-model," I'm gonna perceive myself to be ten pounds thinner with a full head of hair. I mean, if we're gonna start making things up, why stop there?

  • Green beans in the Red Sea? Consumer non-durables such as General Mills (GIS), Coca-Cola (KO) and Campbell Soup (CPB). Those names will work in a deflationary environment but if the government begins to hyper-inflate, they'll give it up as quickly as they got it up.

  • What's the proxy for hyperinflation? The greenback, natch. Keep in mind that financial assets as a whole would rise rapidly but the measuring stick by which they are measured would decline with a greater rate of change.

  • Ever since my Conversation with Mr. Practical, I can't shake the sense that China is gonna revalue the Yuan.

  • Remember, there are two primary focuses here: structural and psychological. The former will manifest either as cancer or a car crash (please don't shoot the messenger, we've been saying this for some time) while the latter is a function of faith.

  • To that second point, the Reserve Primary Fund--remember that?--said it would reimburse investors for 30-40% of their original investment. Why? According to a spokeswoman, that is what's "currently available at the fund at this time." Isolated incident? Perhaps and hopefully.

  • Just putting it out there--don't be shocked if they suspend trading entirely at a point as they figure out the particulars of a rescue package. Keep that in the back of your crowded keppe just in case.

  • Breathe, Grasshopper, Breathe.


R.P.


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No positions in stocks mentioned.

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

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