Freaky Friday Potpourri: Chicken Little Skinned!
Is the sky gonna fall?
So, did I miss anything while observing the holiday?
The wheels officially wobbled off the financial wagon as equity markets caught up with the deep freeze in credit. The supply was harsh, relentless and all consuming as margin calls and redemption notices mixed for a toxic combination into the closing bell.
While we've long warned that such an occurrence would arrive when faith in the system waned and the credibility of our leaders was called into question, reality bites when perception and reality intertwine.
There's no crying in baseball and no hiding in the 'Ville. As such, I'll offer a heartfelt mea culpa for adopting a more constructive stance on a trading basis earlier this week. I was wrong-even if I'm proven early-so I'll humbly raise my hand and say "my bad!"
The trick to trading-much like dieting-is that we can sometimes slip but we mustn't fall. When I consciously opted to add exposure as a function of price rather than stopping out my risk with the trade below S&P 1000, the stumble ensued.
With two profitable upside exceptions--March 17th and July 16th--I've been hoarding cash for a long time and taking shots on the downside.
As such, I have dry powder to pick spots and extend my risk leash while the rest of the world runs for the hills. I'm not post-rationalizing, I'm simply communicating with hopes that my missteps morph into lessons as we together find our way.
I'll once again communicate that this is with the trading portion of my book and my long-term bucket remains 100% cash.
Looking forward, the bull case is that if the market turns, fund managers will be forced to chase the averages higher. In the industry formerly known as Wall Street, under-performance is the only thing worse than absolute loss.
The bear case is that, as the point of recognition manifests the mainstream, everyone and their sister is waiting to sell the rally. I hear it on the Street and I see it in the faces of friends outside the industry who repeatedly tell me "I'll sell something when the market rebounds-it always does."
There are two wildcards. The first is the hedge fund universe, which bubbled for years and officially popped when the government declared financial Martial Law. The fallout will be pervasive and painful, both on a human level and with regard to further contagion.
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