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The History of the World

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Financials remain front and center as mainstay tells...

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"The servant waits while the master baits." Empress Nympho

I've been through some tricky trading situations through the years. Orange County (derivatives, not teen shows), Thai Baht (currency, not narcotics), Russian Rubbles (Sveltlana?), tech bubbles, real estate troubles, terrorist attacks, coordinated agendas, invisible hands and one man stands.

I don't know if I've ever seen a nuttier 26 hours than I did beginning at 2:15 EST on Tuesday.

To be clear, there is nothing new or different about "selling the news" of a FOMC rate cut on the heels of a sharp rally. And, as old school Minyans know, the first move is typically the false move, which manifested in kind beginning yesterday morning.

The unchartered territory, from my perch, was how violent the movements were based on emotion, misunderstanding and desperation. We all saw the news when it hit and, as traders digested it, the S&P gapped 35 handles higher.

From there, the fun was just getting starting. I speak to several multi-billion dollar gorillas and, to a man, they were hitting bids quicker than Angelo Mozilo hits the beach on a hot summer day. I was too, albeit on a much smaller scale, despite the deep belief that they wouldn't let the tape close lower after such an aggressive master plan.

While my risk profile was-and is-a relative Todd-lot (long situations, short financials with defined risk, via puts, such as HBC), I was genuinely surprised to see how quickly the S&P flipped the switch from up 10 to down 8 justlikehat. I was less surprised to see them violently rally back as someone furiously hit the "Buy it now!" button into the close.

The glaring hole in the bovine soul, all session, was the financials, which struggled from the opening gun. Interestingly, these are the names that seemingly benefit the most from the coordinated effort and their action spoke loudly. They remain front and center as mainstay tells with a conscious nod that funds may purge piggies from their year-end sheets.

And that set up was, in my opinion, the most important close of 2007.

I saw Mr. Practical last night and we spoke about how we live in the most interesting juncture in the history of financial markets. He turned to me at a point and said "You think Caesar ever lived through such times?" While my mind immediately drifted to Dom Deluise, his point was well taken. We are indeed witnessing history unfold with each passing day and each flickering tick.

Hang on to ye hats, Minyans, as it's gonna be a wild ride as we stride into year-end and attempt to Count De Monet.

Random Thoughts

  • I wonder if the baseball card collection in my hall closet would qualify as collateral in the eyes of the Federal Reserve?

  • When the dust settled yesterday, we found ourselves right back where we started. Three lower highs in the S&P, under 1490.

  • I told Mr. Practical last night that if Goldman Sachs (GS) doesn't take a write-down by the end of 2008, I would eat a Raider jersey.

  • The Bank America (BAC) admission yesterday that it sees increasing consumer credit losses coming should be flagged for review at a later date as it's uber-consistent with what we've been talking about in the 'Ville. Auto loans, credit card debt, zero-percent financing… it'll all come home to roost and I offer that without vice or virtue.

  • We don't do rumors in the 'Ville but I'm hearing that a derivative desk that rhymes with Scare Turns got caught on the wrong side of this Biogen (BIIB) disaster. As they would say in Fargo, Oh Jeez.

  • Speaking of Fargo, I had a long debate last night about the whole notion of North Dakota and South Dakota. I mean, does it really matter to anyone outside that region? There's no North Montana and South Montana, right? Why isn't it East Dakota and West Dakota? Has anyone been there? Do we have Minyans in that region? How the heck did we get on this topic? And why am I craving Hardee's now?


Answers I Really Wanna Know…


R.P.

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