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Dust in the Wind


Themes continue to manifest around the globe.


"I close my eyes. Only for a moment then the moments gone."

It's been a wild ride this year, with the last two sessions serving as the eye of the hurricane. With earnings, expiration and economics converging into a perfect storm, quiet times are a thing of the past. Batten down the hatches and strap yourselves in, my friends, the winds of the world are upon us.

Some Random Thoughts in no Particular Order:

  • The reverse double chip dip! It's the oldest retailing trick in the book. Mark something up, slash prices and declare it on sale. Intel (INTC) effectively reversed engineered that process, right? The CFO slashed its forecast a few weeks ago, everyone readied for the kitchen sink and the company reported slightly better than (previously reduced) forecasts. That sound you hear is hedge fund managers wheezing in the vice of a 7% squeeze.

  • You know what's not squeezing higher this morning? The dollar, which is again testing multi-year lows against a basket of currencies. We've spoken about the critical crossroads we're currently at, with hyperinflation on one side and watershed deflation on the other. There is no doubt-zero, nada, zilch-that the administration wants, neigh, needs a lower dollar to keep the finance-based economy afloat. The wildcard remains foreign holders of dollar-denominated debt and their propensity for pain.

  • One of my ten themes for 2008 was the return of the greenback. That's been wrong as rain thus far but alas, it's only April. Why, you ask, might the dollar rally? There have been a few thoughts offered in the 'Ville of late, including this missive by Kathy and Boris and the Buzz below, from yesterday, from Professor Mark Bloudek who asked if the flight to safety is over in Treasuries:

    One of the things I've been watching closely is the inverse trading correlation between treasury bonds and equities. The past few days have seen bonds begin a selloff while equities haven't had a corresponding rally.

    Is the market signaling the flight to safety bid is over in the treasury market? This is something to keep an eye on because in 1931 the long bond went from 95 to 65 and the current environment is strikingly similar to that era of deleveraging.

    Will Hank be able to issue treasuries/bailout the banking system if the treasury market doesn't cooperate? If the treasury market were to go into a deep selloff in the current environment, the economy would be headed for the deep freeze in my opinion.

  • Back to the earnings front, where the reaction to news remains more important to the news itself, JPMorgan (JPM) said profits fell 50%--yes, as in half--after $5.1 billion of write-downs and provisions linked to the mortgage crisis. The nugget of note in its earnings was that the company is grappling with a sagging labor market that hurt clients' ability to pay credit cards and consumer loans on time. That, unfortunately, is a theme we nailed and one that should continue to plague society for some time. It should be noted, however, that the stock is indicated higher in pre-market trading.

  • Expiration tends to exacerbate volatility in the days prior to the actual expiry. That would be today-and tomorrow-for those keeping score at home. Pay homage to the volatility by reducing the size of your bets and the amount of your positions. This is one proactive thought that will serve you in good stead.

  • It's nice to know we're deleveraging, right? The Financial Times reports that the total volume of outstanding credit derivatives stood at $62.2 trillion at the end of 2007, up from $34.5 trillion a year earlier. The 2007 level is ten times the level it was four year ago. Think about that. And now think about it again.

  • Yet another theme, societal acrimony, continues to manifest as food crises and grain shortages circle the world. North Korea is the latest nation to face the food crunch, which is becoming an all too familiar headline. Look for water shortages to be the next dour drip on the collective psyche.

  • 5% from here, whichever way the wind blows, the move will seem obvious with the benefit of hindsight. I'm 3:1 in favor of Boo under S&P 1405 resistance (we've been churning) while trying to allow room to that level within the context of my stylistic approach. If the bulls can muster a move through that level, it'll be a triple-top breakout and a likely bovine jailbreak. It's a dicey game of chicken, this "imbalances vs. socialization" thing but we can only play the hand we've been dealt.

  • You can learn a lot just by watching, right? For instance, the S&P futures are up 12 and the NASDAQ futures are up 30 yet Google (GOOG) and Amazon (AMZN) are flat. That speaks to latent supply in the marketplace and virtually assures that they'll take a dip in Red Dye before we hop off the Hump at the end of the day.

  • In honor of National Financial Literacy Month-that would be April-I scribed vibe that walked through Minyanville and what we're doing to address an acute societal need. As a community, we rely on each other to spread the word and do our part. Any help ye faithful can offer in spreading the world would be most appreciated.

  • Fare ye well into the swell!


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