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Random Thoughts: The Risk to Rewards


Opportunities are made up easier than losses.


Editor's Note: The following content was posted in real time on our premium Buzz & Banter. It is being shared here for the benefit of the Minyanville community.

Gate Sniffage! - 9:44 am

  • I'm allowing for a Snapper--potentially to S&P 1260--but my best guess is to fade (read: sell) equity rallies until the credit picture improves.

  • Retail Sales--should we really be that surprised?

  • We day traded Lehman (LEH) from the long side yesterday in what was the definition of dancing between the elephants. I'm not opposed to doing the same today--and I am, so you know, small--with the thought that the sum of the parts may be greater than the hole.

  • Green beans in the Red Sea? Google (GOOG), Research in Motion (RIMM), Yahoo (YHOO).

  • What are the three things I continue to repeat to myself this morning?

    • Know thyself--you're tired and it's been a long, emotional week--trade a bit smaller and do a bit less.

    • The definition of an investment should never be a trade gone awry.

    • Don't wrestle with someone bigger than you three weeks after knee surgery.

  • Massive corporations sinking, huge hurricanes on the horizon, folks losing their homes, locus, vermin, fire, blood... jeezums, is it any wonder folks are freaked out?

  • I've gotta navigate some crosstown traffic at high noon for a particularly important meld. I share that fare in the interest of communication.

  • Good luck Minyans--let's end this week with some jingle in our jeans and a smile in our heart.

Well I'm near the end and I just can't find the time... - 10:43 am

  • If this was a stock, wouldn't you buy it given the nice, rounding bottom? Problem is, it's not a stock--it's the VXO--and the specter of higher volatility likely won't leave many investors smiling.

  • That's not a tell for today, mind you, but it's something to keep in the back of our keppes.

  • How's the action? In a word, tenuous.

  • Keep an eye on Bank America (BAC) and Goldman (GS)--not to mention WaMu (WM)--as they attempt to flip the upside switch. AIG (AIG), meanwhile, is a house of pain (-20%).

  • "It is apparent that the most feared market on Wall Street is not the Bond market or the Stock market, it is the Credit Default Swap market. As a result, problem companies are finding themselves targets of rescue mergers. This is the "playbook" for the current market environment. It started last summer and an end is not in sight yet." --Minyan Mike O'Rourke of BTIG

  • Minyan Charlie Poe is making his cinematic mark in Bahston this weekend. Area Minyans are encouraged to attend!

  • Hey, have some Faith... even if it's blind!

  • Moi? Counting the minutes until our requisite two-day respite although, if my antennae is working, there will be plenty of news competing for our attention.

  • As always... yeah, you know!

I'm Fat, er, Flatter! - 11:23 am

Snapper is trying to stake his claim to fame as we edge through the Freak that is Friday. He knows--as do we--that his success depends largely on the fate of the financials and he's focusing his energy on Morgan Stanley (MS), Goldman (GS), Bank America (BAC) and the fresh, green face that is Wachovia (WB).

As discussed this morning, he's got room to S&P 1260 before resistance kicks in. That's the level of lore for a market so sore. I would caution that real risk remains--AIG (AIG) is screaming for attention--so discipline over conviction in necessary now more than ever.

That's not a directional statement, it's an operational one.

Some Randoms as I ready for The Truman Show:

  • While I may miss opportunities, they're easier to make up than losses. Through that lens--and with the understanding that I've got a crosstown meld and hate blind risk--I'm paring exposure.

  • That includes unwinding my USO bet and putting a tight trailing stop on my morning adds. As the risk to "stop" orders is that they won't protect you if a stock is halted--which isn't out of the question with Lehman (LEH)--I'm yet unsure if I'll still have a position when I sneak to this meeting.

  • You know what stock is quietly acting well the last few sessions? Yahoo (YHOO), where I continue to carry a small, core call position.

  • I would also draw your attention to General Electric (GE), which is quietly down 5%. That's the other side of discipline, Minyans, as I punted my puts as a function of my current approach.

  • Note the drippage in the dollar (-1.4%). That, to me, speaks to an uptick in the potential for a rate cut next week.

  • It's been a long year this week but that's par of this very difficult course. Less than five hours until we pull the proverbial plug, Minyans, so keep your heads up--we're almost there.

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