Cutting Yesterday's Tape: Google, Bernanke, the Dollar...
Capital preservation, debt reducation and financial intelligence.
The following originally appeared on the Buzz & Banter yesterday and is reprinted here for the benefit of ye faithful.
Buzz in the Afternoon! - 12:09 PM
- Is it really any wonder that fingers are pointing as tongues are wagging? The witch hunt has officially began (although I would offer it's been going on for a while).
- Who's to blame? We all are, and I offer that in the most positive, non-acrimonious, way possible, although I will say that if we took our medicine when we should have, we wouldn't be facing such a spanking. Still, and as we've said, there is no watershed solution for the market.
- The writing was on the wall, of course, but nobody wanted to scale it when the screens were green. Man, the more things change, the more they stay the same.
- So, what now? The master betas are getting spanked---wait, can I say that?--as Google burped $30, BIDU isn't far behind and the rest of the usual suspects are being lined up.
- We wondered aloud how the "correction" could be, uh, a correction without pain in these names and now we're seeing now. Context and perspective is necessary, however, as Google is still up 45% since August.
- In a finance based global economy, Apple is RIMM is China is Crude is Gold. There will be relative out-performers, natch, but as my grandma used to say, "What the heck are you doing in the bathroom day and night? Why don't you get out of there and give someone else a chance?"
- No, I'm just kidding. She used to say "You can't spend relative performance." And she's right, although I guarantee you that fund managers operate with a mindset that as long as they don't lose as much as they next guy, their jobs will be safe. Scary but true.
- Despite the fright, NYSE internals are FLAT which is leaving the window open for Snapper. Under S&P 1490, however, the benefit of the doubt rests with the bears.
- I'm slated to be out of pocket tomorrow (and next Thursday and Friday, as long as we're on the subject) so I'm doing a bit less today as I focus on all things Minyan. I'm secretly hoping for a quiet session tomorrow (such that I don't self loathe for missing it) but as any old school Minyan will tell you, the tape tends to get freaky when I'm not here to ride 'er.
- Lemme get this out--I'll be back in a bit. As always, thanks for watching!
Doctor, Doctor, Gimme the News... - 12:34 PM
One more thing as I chew through Bernanke's testimony (what, you don't do that for fun?).
Our Fed Chairman is saying that firms have been "aggressive" in marking down losses and that the asset-backed paper market has stabilized.
Uh, Ben... with all due respect...
With regard to the first point, let's assume that you're right and firms are marking down current losses. It is IMPOSSIBLE--yes, impossible--to know how yesterday's losses will affect tomorrow's performance given the derivative machination. You will hear the term "negative convexity" a lot. What that means in Minyanspeak is that firms (positions) get longer when the market trades lower and shorter as it trades higher (that's been our chief beef with Aunt Fannie for oh-so-long).
Secondly, and again, no salt here, weren't you the same gentleman who assured us that subprime was a pimple on the much broader financial complexion? Trust me brother, I hope you're right--as I've said, nobody is gonna win if the wheels fall off the wagon. But in the interest of preserving your integrity and, by extension, faith in our system, you gotta remember that hope isn't a viable investment vehicle and the more people know, the better they'll be able to prepare.
At least that's my take, although nobody's ever called me a politician (to my face!).
Woah, Nellie! - 1:14 PM
One more thing as I chew through Bernanke's testimony (what, you don't do that for fun?).Our Fed Chairman is saying that firms have been and that Uh, Ben... with all due respect...With regard to the first point, let's assume that you're right and firms are marking down current losses. It is IMPOSSIBLE--yes, --to know how yesterday's losses will affect tomorrow's performance given the derivative machination. You will hear the term "negative convexity" a lot. What that means in Minyanspeak is that firms (positions) get longer when the market trades lower and shorter as it trades higher (that's been our chief beef with Aunt Fannie for oh-so-long).Secondly, and again, no salt here, Trust me brother, I hope you're right--as I've said, nobody is gonna win if the wheels fall off the wagon. But in the interest of preserving your integrity and, by extension, faith in our system, you gotta remember that hope isn't a viable investment vehicle and the more people know, the better they'll be able to prepare.At least that's my take, although nobody's ever called me a politician (to my face!).
- It's getting hot in here (so hot) as the temperature in my corner digs suddenly jets higher precisely as the 'Ville browned out. My clothes are still on, mind you, but that's simply because I can't find a borrow on them.
- We spied the "S's over N's" theme straight out of the gate and man, it's manifesting in a big way. Why? Massive out-performance into today, for one, coupled with the fact that the banks are already down 20% year-to-day.
- As goes the piggies, so goes the smoke.
- NDX 2060. See it, feel it, touch it, be it.
- Dry eyes? Biotech, Morgan Stanley, which has "room" to $60 (decent entry for Boo, if and when), the consumer non-durables (including drugs, which you would expect in a slowing economy) and UNH, which is trying to breakout through $50.
- When is the surprise rate cut chatter gonna start? Soon, I bet, although it's worth remembering that this latest spate of carnage began right after the last rate cut. Only so many bullets in that gun, son, and the last one will be pointed inward.
- There is nothing to suggest higher prices into the close....so why is my gut ever-so-wary of a massive Snapper this afternoon? Mr. Pavlov at your service! If I was conditioned as well as the the collective mindset, I wouldn't have to endure these gawdforesaken 6:00 beatdowns!
- Breathe... it could be worse. It could be raining!
The is trading LIMIT DOWN, which means that it cannot trade below this level for ten minutes.Interesting that this is happening as I start getting "hit up" that the FBI is going to issue a terrorist warning into the holidays.Can we trade lower? I would argue we should. Will we? I'm not making that bet.Man, you can cut the tension with a knife out there despite it being thicker than a New Jersey accent. I feel it--heck, I'm living it--so, with a deep breath in tow, I'm gonna remove emotion and offer these top-line vibes:
Take it to the limit one more time... - 1:22 PM
The NDX is trading LIMIT DOWN, which means that it cannot trade below this level for ten minutes.
Interesting that this is happening as I start getting "hit up" that the FBI is going to issue a terrorist warning into the holidays.
Can we trade lower? I would argue we should. Will we? I'm not making that bet.
Don't get saucy with me, Bernaise! - 2:10 PM
Man, you can cut the tension with a knife out there despite it being thicker than a New Jersey accent. I feel it--heck, I'm living it--so, with a deep breath in tow, I'm gonna remove emotion and offer these top-line vibes:
- If you find yourself rationalizing your risk, that's a tell-tale sign that you're trading chock full of emotion. When in doubt, sit it out or trade "in-between." Rash decisions have a way of coming back to bite you in the arse.
- Snapper is doing his best to show these bears of will what will really is. Again, our "tells" are pointing south by south and trading isn't about hocus pocus or hair on the back of your neck. So while I gave him an honest gut shout out before, please base your decisions on your own personal risk profile and time horizon.
- Laundry lists? Names that are green today might be giving Hoofy a wink as "go to" trades when the tide turns. AMAT, KLAC and NVLS are on that list, along with MS, WFC, HON, AA, DD and DE. I'm not talking long-term investments here, Minyans, I'm talking defined risk tries if it fits your schtick.
- Today's end-of-day fray aside, it's worth remembering that we're in the early--dare I say first or second--innings of the credit unwind, one that will surprise alotta people in it's depth and severity. Please, please... please... keep that in mind when the screens jump green anew. The time to focus on risk is when the market is up and the time to scan for reward is when it's on it's heels.
- I'm a buyer of Calgon in size. Take me away!
More Answers I Really Wanna Know - 2:55 PM
- Why does it worry me when the loudest bear on the Street is looking for a sharp rally?
- Or when those who've sorta seen this coming (such as myself) are similarly eyeing a Snapper?
- But that's a trade, right?
- Which is dancing between the elephants given the inevitable write-downs that are still to come?
- When's the last time that overnight risk was this high?
- Does that mean that no news is good news?
- Hello... is there anybody out there? Just nod if you can hear me? Is there anyone at home?
- Do you see the dollar turning higher?
- Is this the beginning of the "reactive greenback rally" we spoke of earlier today?
- My goodness, what's gonna happen if we see a real "counter-trend" run in the buck?
- Wyld Stallyns?
- Are you trading on what was (your cost) or what will be (where we're going)?
- OK, should I just sit Gisele down for a heart-to-heart on her dollar stance?
- I mean, the things I'll do for Minyanville, right?
- Limit down? How bout pencils down?
No Soup For You! - 3:38 PM
Well, as I just told my team as the tension broke, I did everything but aggressively buy 'em when my admittedly paunchy gut sensed a Snapper. Still, here he is in all his glory--let the games begin!
This tape feels like a Charles Dickens novel each and every session. Either that or a STYX song, which I'm scared to say after the backlash I got the last time I openly admitted liking Tommy Shaw's musical vibage. Anyway, I digress---which perhaps is allowed considering my 6:00 AM kick-boxing was the least punchy I've been all day.
So, it's another kick save (and a beaut) as we eyeball yet another closing toll. And while this could conceivably carry over, I'll ask you to revist today's Buzz and recall with clarity how you felt each step along the way. If you had too much risk when they were in the hole, you likely still do as they climb out of it. It just feels like less because they're a bit higher.
I don't profess to know where we go from here, although I know what to watch (the dollar, financials, beta) and respect the two-sided risk. The best advice, er, guidance I can offer is to circle a laundry list both ways such that you're one step ahead of the crowd when your price arrives.
Capital preservation, debt reducation and financial intelligence. I'll say it till I'm blue in the face because it matters that much.
I'm supposed to be out of pocket tomorrow but I've been having a personal tetherball all day as to whether I "can." I'll be working, natch, but I was (am?) planning on doing so remotely. I'm reminded of what I always offer with regards to stepping away from the tape. Whenever you feel like you can't is likely when you need it most.
I'm gonna hop and ready for the MVHQ staff meeting, which will feature young Cory singing a slick tune. I wonder if he takes requests? We'll know soon enough, Babe, and we'll communicate in kind.
Fare ye well into the bell and remember that there's a lot more skeletons out there. The reaction to news remains to be seen, natch, but we should always respect that it's there.
May peace be with you.
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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 firstname.lastname@example.org.
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