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Defined Risk: Plan For the Future


Heck, forget leadership. At this point, we'll take simple participation.


The following appeared on the Buzz earlier today and is reprinted here for the benefit of ye faithful.

The New Phone Books Are Here! - 1:47 PM

Man, they hate those cans, eh? Between overnight news from the ECB and this morning's Goldman report, Hoofy had every opportunity to put Bonnie up in lights. He tried but she cried, all the way to the edge of the abyss.

We sensed "straight up" was a little too easy and, on cue, the bulls ran for cover when the ursine took aim. That supply pushed the tape---and our nerves--to the limits as multiyear lows in the financials were pressed and stressed. We're trying to bounce back as I furiously scribe, with all eyes on the financials for any signs of leadership.

Heck, forget leadership. At this point, we'll take simple participation.

In the interest of full disclosure...

When I saw (heard?) that Goldman (GS) was trading $4 higher pre-opening, my gameplan was to fade (read: sell) 'em for a trade. When it opened (slightly) lower, I sat on my hands, awaiting the probe and, once it arrived, nibbled anew on some long side exposure in the banks and homies (Pulte (PHM)and Citi (C), among others).

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That might seem inconsistent with my big picture bent but there's a method to the madness--defined risk. The set-up, for a pure trade, was better (read: more defined) for a long side try once we sloshed lower. And time horizon is key here---we're talking pure trade. I continue to believe that Boo has the ball below S&P 1490 and I'll further share that risk is increasing. I'm simply trying to make some hay while the sun shines and get out before the storm arrives.

As long as we're being honest, I'll also share that my leash on Citi is uber-tight as I expect a dividend cut and don't wanna carry risk around (although, admittedly, the market could react favorably to it, I simply don't know). With Pulte, I'm just looking for a few bucks and, as discussed, will cut bait if HGX 140 woofs.

Finally, I've gotta say this. There is a ton of tension out there, people are moody and relationships seem strained. While unfortunate, this doesn't surprise me as societal acrimony is an inevitable bedfellow of our projected path. And it will get worse, in time, as the middle class continues to erode and the chasm between the haves and have nots widens.

See it. Prepare for it. Ready yourselves and your family. We, at Minyanville, will continue to do what we can to facilitate financial literacy and community spirit, including a fantastic kids initiative and social networking functionality that will spring to life shortly. But at the end of the day, this is all about you--your choices, your family, your life--so take a deep breath and dig in for the long haul. We will get there.


I Can See! I Got Legs! I Got Legs! I Can See! - 2:45 PM

Hey there, Billy Ray, guess whose Bloomberg just came up for the first time today? Not Ophelia. And it wasn't Coleman. Randolph and Mortimer? Nah, they're machines turned off a long time ago. Yep, Hoofy and Boo are no longer flying blind.

Luck? It's not luck,'s the marvels of modern technology! Some top line thoughts...

  • Much like we saw last week on the back of the Global Coordinated Liquidity Injection, I have a hard time seeing them let the tape melt lower in the face of the overnight ECB efforts. This may be a Band-Aid on a broken bone but there still seems to be gauze in their back pocket.

  • That isn't to say that this will "work." As Pep so eloquently scribed last week, there is precedent here and while that was 77 years ago, the intended beneficiaries of those efforts, Austria and Germany, had a long road to hoe. Or is it long row to hoe? Whatever, they had a tough time.

  • To quote my friend, "What is important is not that they failed to stop financial crises, but why. The answer is that markets eventually chew through fiscal and monetary intervention in spite of us. So frequently, in fact, almost always, the cure is far worse than the disease. Just something to think about."

  • That will be then and this is now, I know, so for purposes of today's fray, I'm looking at the path rather than the destination. And that path, following a stern probe that pushed us to the precipice of pain, is putting on a brave face. N's over S's, as you no doubt see as the financials continue their struggle to find their footing.

  • For my part, I've made some token sales against some of my in-the-hole buys but make no mistake, I'm not coining 'em today. I've battled back from a self-induced hole, mind you, so no complaints. Nobody listens anyway.

  • This is contra-hour (pure reminder) so keep your eyes on the internals (NYSE 9:5), Goldman (trades heavy, Betty), beta (performance anxiety is back in vogue) , the homies (they've been trading dry but have yet to snap, crackle or pop) and the clock (are we there yet)?

  • My intention, so you know, is to stay light, tight and otherwise balanced when thy closing bell tolls. With upwards of 9,000 hedge funds standing in a circle shooting at each other, I'm quite fine with letting them dance, partner, and picking up scraps when I can.

  • As always, I hope this finds you well.



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Position in PHM and C.
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