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Randoms: Mindshare Matters


Compartmentalize, then assimilate.


Editor's Note: The following was posted in real time on our premium Buzz & Banter (click for a free trial). It's being shared here for the benefit of the Minyanville community. See also When Pigs Fly.

Gate Sniffage - 10:29 am

I'm no freaky conspiracy theorist (really, I'm not) despite my consistent challenge of convention wisdom. We recently spoke of several accepted truths that warranted a scrunched nose--including the once laughable notion that the government had a hand in the market--through the lens of provoking, rather than shaping, thought. Indeed, if we've beaten a consistent drum over the years in the 'Ville, it's been to ask "why?" rather than to simply accept "what?"

As discussed this morning, mutant variations of an obscure strain of a swine virus is outside my wheelhouse. I do, however, have experience with market psychology and will offer that the mere specter of this outbreak being man made is not factored into these levels.

You can assign any probability you wish to this currently unspoken and extremely disturbing thought--5%... 10%... it's completely your call--I will simply put it out there for the collective noodle. You most certainly don't have to agree with it but I, for one, would rather you see both sides and make that decision for yourself.

Some thoughts:

  • Into this Snapper attempt, I nibbled on some S&P puts to see how the dust settles. I'm well aware of the potential acne above S&P 875 but we'll cross that bridge when we get to it.

  • Green beans, as suspected, are nestled in the pharma complex with some tertiary strength in consumer non-durables. Why consumer non-durables? If folks gotta stock up and wait this out...

  • Other spots of select strength? Goldman (GS), Research in Motion (RIMM) and Baidu (BIDU), which warrant respect as they're good psychological proxies.

  • Breadth? 3:1 negative (and yes, it's still early).

  • Keep an ear peeled to the Supreme Court tomorrow as they hear a case on whether the Treasury Department can block state authorities from enforcing state consumer protection against national banks. This decision will have far-reaching implications for the psychology surrounding the role of the government in big business.

  • N's over S's.

  • What an awesome show Saturday night, and I've been to my fair share (north of 50). Alotta my personal faves--Cassidy, Sugaree, He's Gone, St. Stephen, Brokedown--but the highlight, for me, was a rockin' rendition of Gimme Shelter, which caught the seasoned crowd by surprise.

  • Deep breath, my friends, just make sure it's a safe breath. I'll be back.

Of Pokes and Smoke! - 12:05 pm

As if there weren't enough to think about, the specter of a global pandemic adds yet another layer of uncertainty to the collective equation. While it's easy to be overwhelmed by the current state of affairs, compartmentalizing the various elements sometimes helps the assimilation process. Along those lines, here are some of the items competing for mindshare:

  • S&P 875, which is the most significant level of lore in recent memory. While technical analysis is a better context than catalyst, traders around the world are keying off that inflection point.

  • Pakistan. With the Taliban sixty short miles from the capital city of Islamabad, we would be wise to keep this nuclear state on our radar.

  • He Said, She Said. The back and forth banter between embattled Bank America (BAC) CEO Ken Lewis, Fed Chairman Bernanke and former Treasury Secretary Paulson has massive implications for the psychology surrounding the government's role and responsibility in the capital market structure.

  • Stress Test! While the "more adverse" scenario" of a 3.3% overall contraction, 8.9% unemployment and a 22% decline in home prices (followed by a rebound in GDP of .5%, a 10.3% unemployment rate and 7% degradation in home prices the following year) is debatable, what 'should' become clear is that banks, by and large, will need to raise more capital (further diluting equity holders) and some won't make it to the other side of this price discovery process.

  • Earnings and economics. It's another big headline week with a slew of data coming from the Beltway and earning galore, including Bristol-Meyers (BMY), Baidu (BIDU), Pfizer (PFE), Time Warner (TWX), General Dynamics (GD), Procter & Gamble (PG), ExxonMobil (XOM), Newmont Mining (NEM) and MasterCard (MA) slated to paint the tape.

  • With regard to the here and now, the market acts much better than I personally expected, which is certainly worthy of a mention. Respect--don't defer to--the price action as that's a recipe for tape chase-age. For my part, I've got that Todd-lot of S&P puts on my sheets will continue to take the pulse with each passing tick.

  • As always, I hope this finds you well.


In memory of our fallen friend and trusted colleague, Bennet Sedacca, 100% of the donations made to the RP Foundation through April will be channeled to philanthropic endeavors consistent with the RP mission, working closely with the Sedacca clan in the distribution of those funds. We thank you kindly for your support as we strive to effect positive change in the lives of children.

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