Freaky Thursday Potpourri: Fireworks Central
Kicking off the Fourth with a bang?
Red and white, blue suede shoes
I'm Uncle Sam, how do you do?
Gimme five, I'm still alive
Ain't no luck, I learned to duck
Are we there yet? Well, we're much closer…
Following this morning's ECB rate decision (25 basis points, all ears will be listening to Trichet's rhetoric) and our Breakfast with Beeks (whispers were for a six-figure loss), we'll have three and a half hours of flickering ticks before we can finally take a deep breath and a step back.
Focus Minyans, as the decisions you make today will dictate the risk profile you chew through at the Barbecue. Some early observations:
- Yes, it's bad out there. We've been mapping this storm for many years in Minyanville and it's finally hit home. While an assimilation of our four primary metrics are problematic, the big picture is made up of alotta smaller pictures. Yes, we're likely going lower but no, that doesn't mean it has to happen in a straight line. Manage risk, and the reward will come.
- Following the big step, little step analogy, S&P 1470 (former support) is newfound resistance. Interestingly, the March lows for the four-letter freaks won't come in to play until NDX 1670 so that's worth noting as we eye potential vehicles (both ways).
Click to enlarge
- I continue to eye (use) Google as a short vehicle/downside hedge as it sniffs at that monster gap ($525-450).
- The potential spark in the dark for an upside move? The action in the banks, yesterday, as Goldman, Lehman, JP Morgan (note resistance at $26) and Citigroup all acted dry in the face of supply.
- European banks rallied across the pond so watch this complex today, particularly in the face of Citigroup's research note suggesting that UBS AG may report more write-downs and raise additional capital.
- The Critters are breaking out!
- Position wise, lest you were out yesterday, I punted my Lehman long into yesterday's rally and "traded around" my Wachovia calls, selling my overage (but perhaps not selling enough) into the run-up. I also added some GM September calls into the meltage, risking a buck and change and taking the other side of pervasive negativity.
- GM may have room to swoon, I'm simply taking a calculated approach that it's not in a single, straight line. I could be wrong but when Mattel--the maker of matchbox cars--has a bigger market cap ($6B) than GM ($5B)-the maker of real cars-it's worth a look.
Answers I Really Wanna Know…
- Have you printed out Mr. Practical's superb article on deflation for weekend reading?
- Are you watching this massive tug-o-war as we sniff at the March lows?
- Do you think the weather will be this superb tomorrow night at the Stadium for the Yanks-Sox?
- Do ya think I'll see Madonna there?
- Isn't it crazy that median home prices in NYC have risen despite the capacity on the market?
- Sorta "hopeful," isn't it?
- Are there too many all-of-a-sudden bears or do the steepest sell-offs occur in the context of oversold conditions?
- If you're disciplined, it shouldn't matter. Right?
- How many fund managers will be forced to sell General Motors if it becomes a single-digit midget?
- Where are we and where are we going?
Dick Grasso won a key court victory yesterday, ending attempts to block his $187 million compensation. This is more of a moral dilemma than a legal one. He signed a contract-this was money that was due to him.
This speaks to the shifting social mood and the coming era of austerity.
Social mood and risk appetites shape markets, not the other way around.
Two dynamics are currently in play: voluntary risk and involuntary risk.
Involuntary risk involves not being able to afford filling up your call and taking your family to Applebee's.
Voluntary risk is when you have money but choose not to spend it.
I spent some time this past weekend with folks who have a lot of money. They told me they're curbing their spending due to what they're seeing.
If you subscribe to the fact that we're already in a recession, one that's been masked by the lower dollar and skewed by the spending habits of a slimming margin of society, this is potentially problematic.
I read recently that less than one percent of the population is holding more than 99% of the wealth.
Following that thought, the mindset of the "have's" could have far-reaching implications for the economy.
The flashy rides and outrageous spending habits that were badges of arrival during the era of consumption now serve as hollow reminders of misplaced priorities.
There's certainly a lot to chew through as we step away from the screens and surround ourselves with friends and family. That, in and of itself, is a blessing. After hearing of our close friend Jeff Macke's loss and digesting the pain and suffering around the world, it's incumbent upon us to maintain perspective as we find our way.
It could be worse. And for alotta folks around the world, it is.
Think positive Minyans-and remember, by the time we're there, the journey will have already ended. Along those lines, my journey will take me away from the fray next week as I'll be recharging my batteries for what promises to be a wickely wild second half.
Happy Fourth of July and remember, if you've tossed a few back, don't get behind the wheel of a car.
It's simply not worth it.
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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