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Freaky Friday Potpourri: The Seven Year Itch


A period of socioeconomic malaise is upon us.


It takes dynamite to get me up
Too much of everything is just enough
One more thing I just got to say
I need a miracle every day
Grateful Dead)

Jeezums, there's a LOT going on, eh?

Pffft! General Electric (GE) just shaved a bit off the ol' knee cap.

Zippp! General Motors (GM) sliced off a sliver of shoulder.

Zonk! A slab of Fannie (FNM) just slammed to the pavement.

It's a minefield out there and it's freaky to say the least!

With so many crosscurrents in our midst, there's no shortage of topics to talk about. We speak daily about the tender tea leaves and their predictive powers. We're keeping tabs on BKX 60. We often circle back to the many missives of years gone by that scripted the twists that have come to fruition.

Click to enlarge

We don't take victory laps in the 'Ville and for good reasons. First, if we don't stay humble, the market will do it for us. Second, there's someone on the other side of every trade and it's not our style to smile while others are hurting.

The purpose of this missive isn't to foretell the next few percent-it's to provide perspective. The cumulative imbalances we've incessantly discussed are coming home to roost and there aren't any "easy" answers. Time and price are the only arbiters of our financial fate. Time. And price.

As the CEO of Minyanville Media, I must position our organization to endure the systemic risks in the system. When I talk to my management team, I communicate that this prolonged period of socioeconomic malaise will likely last five to seven years. It won't be a straight line, but it'll certainly be a steady grind.

The task at hand is simple--survive, but do so in a manner that strategically adds capacity into the downturn. It's a methodology I learned while trading, with human capital taking the place of financial instruments. Consistent with that thread of thought, we must sync our time horizon with our risk profile and therein lies the point of this post.

My grandfather used to tell me "don't run scared." I've since used that in many iterations, including "don't trade scared" and "trade to win-never trade "not to lose." I share this mindset with the Minyanship because we need to keep it front and center. Lucidity is our friend. Emotion is the enemy.

Yes, it's dour out there. Sure, it takes three times the work to make half the money. No, it's not impossible. Those who navigate this prickly period will be in a superb position to prosper on the other side of this wild ride. We'll need a longer runway for our efforts to take off but the winners of the new world will fly high.

Keep your chin up for Ruby used to also say, "Think positive, this too shall pass."

Random Thoughts

  • I'm actually skewed long in the financials now, with a slew of Wachovia (WB) October 17.5 calls vs. my remaining American Express (AXP) puts.

  • Should BKX 60 fold, I'll look to balance my book. Either way, as it stands, my total exposure is limited by my call premium. If my long exposure goes to zero, it would hurt but I'll still in business. So, I've got that going for me.

  • IF (sketchy if, but work with me) Hoofy can turn the tide, you'll hear chants of "successful retest of the March lows" coming from every orifice in Matador City. S&P 1275 is the level to watch in that regard.

  • I wonder what Hank Moody is doing right about now?

  • Good traders know how to make money, better traders know how to take a loss. I said Wednesday afternoon that if the dollar didn't open higher yesterday morning, I was gonzo in my USO puts. It didn't, I am, and I'm thankful for that discipline.

  • Breathe. Remember to breathe. Seriously, if you don't breathe, you'll be gonzo!

Answers I Really Wanna Know…

  • Are the actions of inaction by Anheuser-Busch (BUD) and Yahoo (YHOO) endemic of a broader socioeconomic dynamic?

  • Y'all see how dry the KRX (KBW Regional Banking Index) traded yesterday?

  • How many hedgies were hiding in the high-fliers hoping for some quarter-end bang for the buck before Research in Motion (RIMM) BBM'd them?

  • How volatile will it be next week given the holiday thinned ranks?

  • If Google (GOOG) is the world's biggest deflater, is Facebook the world's biggest productivity suck?

  • Speaking of Google, are you remembering to watch that gap below $525 that "works" to $450?

  • If that stock "begins to fill," wouldn't the other side of $525 be an intuitive short-side stop for Boo to take a swipe?

  • How can folks ponder capitulation with the VXO at 25?

  • Where's Hank?

  • Where's Waldo?

  • Where's Franklin Raines?

  • When's the last time you "Did something Joel?" (A random act of kindness.)

Good luck Minyans-let's end this week with a smile on our puss and some jingle in our jeans!


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