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Random Thoughts: Can We Trust This Excellent Adventure?


The question we need to ascertain is whether or not the worst is behind us in the near-term...


As Bill & Ted party on, the rest of us are left to wrestle with whether we've seen the start of the year-end rally. Surely, with doom and gloom splashed across BusinessWeek and the Economist, the abyss isn't catching anyone by surprise. The question we need to ascertain is whether the worst is behind us in the near-term or if this lift is a gift that should be traded in for a tree.

While I haven't traded 'em particularly well (always honest), I did flip my lid and began operating from the long side last week. I've picked my spots and took some shots---some worked, some didn't--and entered today's session with scattered longs, including Schering Plough (SGP) and Pulte Homes (PHM). Both of these--and, in fact, every long side try I've attempted in the last week--were and are pure trades as I attempted to position for an oversold bounce.

Now that we've got it---and conscious that it may, in fact, continue--I've balanced my stylistic approach. That includes trailing stops on my longs, laundry lists for my shorts and patience by and large. It also includes some strategic short-side tries with defined risk and uber-short leashes.

In short, the last two days may have, in fact, been the "easy" trade. Imagine that!

The final stretch of 2007 is going to be a humdinga with month-end flows (redemptions), year-end performance anxiety, looming shoes (credit), Fed help (December 11th), false starts and massive agendas. So it's said and so you know, I don't think Boo's done by a long shot as the structural imbalances will percolate for a long time. That, to me, is intuitive. The timing, as always, is the trick.

As for today, the critter compass is pointing to the moon, Alice, but trap door potential exists, particularly if S&P 1450 and DJIA 13K shift overhead (in that order). I expect a test at a point and we'll keep close tabs on our tea leaves when and if that arrives.

Interesting times indeed.

Random Thoughts

  • Don "don't call me snow" Kohn-you know, the Vice-Chairman of the Board of Governors of the Federal Reserve System-made comments this morning that are fueling hopes of further rate cuts at the December 11th meeting. "We will act as needed to foster both price stability and full employment," he said in a statement.

  • It's interesting to note, however, that the dollar is HIGHER on this news, which is precisely the opposite of what one would expect if rates are heading lower.

  • And you saying there's no deflation?

  • Hey, there's my 5% rally in Citigroup (C)! Grrr…

  • While I was sniffing around on the short side in gold this morning, I didn't pull any triggers. Sure nuff, there it goes... down $17... along with crude, which is off 3%.

  • "Asset class deflation vs. dollar devaluation" isn't an all day, every day thing but it IS a lens that has proven quite valuable over time. Keep that commodity action front and center, Minyans, as I don't view it as a bullish element for equities.

  • My sense is that financial stocks will remain dicey, crowded and frustrating as we weigh the specter of rate cuts vs. the looming shoes that are sure to drop. Perhaps there are better battles to fight.

  • Note to self: when we get through the December tri-fecta of MV Kids, The Exchange and Festivus, take some time off and recharge the batteries!

  • Never underestimate the power of a random act of kindness. For instance, a kind gentleman named Jamal works in the coffee kiosk across the street and has served me coffee with a smile for the last three years. I invited him up to MVHQ to see what we do and his glow resonated as I walked him around to meet the troops. It takes five minutes to "do something Joel" and the effects will last a lot longer than we could ever imagine!


Holiday Festivus is here! Come join us and support the Ruby Peck Foundation For Children's Education at an old-fashioned Southern-style hoe-down in the heart of New York City on December 7th. Click the image below to learn more!

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Positions in SGP, PHM, SPY
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