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Selling Rips, Buying Dips


McDonald's, Burlington Northern are two to watch.


Hello from New York, where, for the second time in 2 weeks, I find myself unsure of exactly how to deal with some luminary borrowing my phrasing without attribution and, in today's case, utterly out of context.

Today, it's the Wall Street Journal and Burton "Random Walk Down Wall Street" Malkiel himself, taking the other side of my 3-week-old trade: "The best position for investors today is not 'fetal and 100% in cash'."

On the upside, it's nice to be noticed. On the downside, Malkiel matches the New York Times' Thomas Friedman's non-attribution and even one-ups the Paper of Record's economist by neglecting to mention that "Cash and Fetal" was thrown off my cuff in September. At the time, the Dow Jones Industrial Average was 2,000+ pts higher than when Mr. Malkiel penned his plea to "Keep Your Money in the Market."

Of course I took his comment personally. I take rain personally. I find personal insults in sunsets. Whether Burton is picking a fight or not, I'll offer this:

a) I don't particularly care if the behavior of the tape subsequent to the cash comment proves or disproves your randomness theory (but I'm glad I sat out the drop);

b) Between demonstrable market inefficiency and the Fed Chair's inability to ward off the plunge, it's been a tough few weeks for academics in general and Princeton in particular;

c) "We've seen panics before" isn't a heck of a lot of solace, and it's even more obnoxious than "I told you so" (which you'll note no one around here is saying) and

d) If you're going to get the quote wrong, take it out of the "quotes."

Other thoughts (while Todd-O and I debate which one of us the world actually orbits around):

  • I bought the aforementioned Citi (C), settling for the dip I could get prior to 10 a.m. yoga. Felt sort of good about it as I glanced at the tape on the silenced TV (I'll do yoga, but not yoga "classes." If the goal is reducing tension, having the option to at least see the headlines helps). It was a perfect plan - until the end of my session, when I saw George W. and Italian PM Silvio Berlusconi striding towards open microphones.

  • Which is not a political statement: I'm just saying I've spoken to elected members of both parties in the last 2 weeks. Indeed, I've been "borrowed" by the papers of record on both the left and right. My current political stance is somewhere between Whig and Bull Moose. My logic is this: "They both sound kind of funny and cool - and they don't exist anymore." The latter is a distinct advantage in today's political environment.

  • Just because I'm standing up and not 100% in cash doesn't mean I'm comfortable about it. Put it this way: The position is now happy - but not even a longtime McDonald's (MCD) bull such as myself actually thinks Micky D's is a 7% better company today than Friday. The stock traded 10 points lower than the current quote at one point on Friday. I didn't buy it that low, but I'd prefer steadier moves from my steadier (read: more boring) operators.

  • The point is "Selling Rips and Buying Dips." It may only be due to random chance, but I've been sticking more or less to that strategy throughout 2008, Burton, and it's worked okay so far. Which is to say, I'm alive. Not by much, but this year, in this market, I'll take it.

  • To my earlier point on "capitulation": The bulls have gone from "beaten senseless" to "obnoxiously cocky" in one day. This, of course, ties the record for Emotional 180s, which have occurred countless times during every bear market in the history of man.

    Makes me ponder selling some Micky's and Burlington Northern (BNI) after I get off the train this afternoon. Talk to you then, Minyans.
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Position in MCD, BNI

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