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Freaky Friday Potpourri: Slippery When Wet!

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Investors gear up for the upcoming G-20.

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Have you ever driven down an icy road when all of a sudden, you realized the steering wheel was no longer steering? The wheels were sorta sliding? The instant when the point of recognition arrived that you're no longer in control?

I'm starting to get that sense as I listen to the buzz and banter from the Beltway. Between the societal acrimony percolating around AIG (AIG) and the Chinese chatter about the dollar-coupled with the very fragile socioeconomic mindset-we've arrived at yet another critical juncture for global financial stability.

Just in time, it would seem, for next week's G-20 summit.

Hoofy has noted the potential for further performance anxiety, the constructive internal anecdotal evidence and, naturally, the "all in" from the U.S. government and central banks around the world. Given the massive declines we've seen since October 2007, the natural assumption is that much of what we've warned of is already baked in the cake.

I'm reminded, however, of something Pep first wrote about in 2006. Social mood and risk appetites shape financial markets, not the other way around. The Crash of '29 didn't cause The Great Depression-The Great Depression caused the stock market to crash. It's a subtle yet crucial point if we're to truly use history as a guide.

This may not be near-term business but I'll ask ye faithful to file it somewhere in the back of your crowded keppe. Over the last eight calendar years, Minyanville has stressed the importance of risk management over reward chasing, capital preservation, debt reduction, financial literacy and, more recently, the necessity of financial staying power.

You can trade 'em seven ways till Sunday but we must always see both sides. Three weeks and 20-something percent ago, nobody wanted to talk about a rally. Now, it seems, folks don't wanna pay homage to risk.

This is what we've trained for, Minyans, and it'll take some moxie, muscle and motivation to push forward. We will, for this is what we do. The alternative is simply not a viable option.

Random Thoughts:

  • Funny, it doesn't seem like two full years since we peered around the corner at the implications of China and the thin line between globalization and isolationism.

  • President Obama will break bread with the top dog's at Citigroup (C), JP Morgan (JPM) and Goldman Sachs (GS) today. I sure wouldn't mind being a fly on that wall.

  • One thing for them to keep in mind on the regulatory front-if they make hedge fund regulation so strict that it further cripples the industry, the unintended consequences for Wall Street will be pervasive. The words "healthy balance" come to mind.

  • A few Minyans have asked what I mean when I say the buyers are higher and the sellers are lower. In a nutshell, traders are reactive and they're getting bullish on rallies and bearish during sell-offs, exacerbating the wicked volatility.

  • Scary thing is, I had a premonition yesterday that something like this could again rear its ugly head...

  • Quarter-end is Tuesday, which means the upside influences-as they related to performance anxiety-will likely abate today. We used to call it the Spitzer effect (nobody wanted to be obvious in their gamesmanship) before that term assumed an entirely different meaning.

  • Speaking of "this is what we've trained for," I'm hoping the Big East dominance continues tonight as a very tough Oklahoma squad awaits my gritty and beloved Orange. We'll be gathering the troops from MVHQ and bellying up in the hood as it just doesn't get much better than this.

  • Reading Mr. Practical's mailbag reminded me of a column written in September 2007 that begged the question, "Why is the Fed trying so hard to avert a recession?" I think we can now answer that question with a bit more clarity, eh?

  • Many kind thanks to all ye faithful who've paid tribute to Bennet through the RP Foundation. At the end of April, Nan and the clan will have a positive path to perpetuate his good name.

  • "Twenty years from now you will be more disappointed by the things that you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover." --Mark Twain


R.P.




In memory of our fallen friend and trusted colleague, Bennet Sedacca, 100% of the donations made to the RP Foundation through April will be channeled to philanthropic endeavors consistent with the RP mission, working closely with the Sedacca clan in the distribution of those funds. We thank you kindly for your support as we strive to effect positive change in the lives of children.

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