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Random Thoughts: Rally or Reality


We'll see how the tape reacts to the Fed.


Last night, on FOX Business, I was asked to communicate my top five power players on Wall Street (click here for the video). This was my take:

5) Meredith Whitney of CIBC world markets. She was ahead of the curve on the issues in the financials and stood her ground despite death threats. That earns her an honorary mention in the top five.

4) Treasury Secretary Hank Paulson. Sold almost $500 million in Goldman (GS) stock tax-free when he took the job and has his finger on the plunge protection buy button. Never underestimate how vicious a cornered animal can be.

3) John Succo of Vicis Capital. The best risk manager I've ever seen. He understands the cumulative imbalances and captures inefficiencies in good markets and bad.

2) Warren Buffett. He deftly maneuvered his way through the mortgage bond insurer situation and remains one of the shrewdest investors in history.

1) Jamie Dimon. Picked up Bear Stearns (BSC) for a song and is best of breed in a troubled industry. Sandy Weill made a massive mistake in letting him go and Jamie is making Citigroup (C) pay for that daily.

And now, our regularly scheduled Random Thoughts…

  • It's deja vu all over again as President Tyler shines bright on Turnaround Tuesday.

  • While the tape trades stronger than a mule's breath, my modus operandi remains the same. I sold a slew near the opening and I've since spent my time in "hit it to quit it" mode both ways.

  • My intention was to nibble back into a dip. We haven't seen one thus far but we should on either side of the rate cut.

  • You know what also just poked back into my crowded keppe? The sharpest rallies occur in the context of a bear market. One of these pups is bound to stick, I know, but it's worth remembering the series of lower highs in the S&P.

  • That's what I meant yesterday when I drew the distinction between "a" low and "the" low. This could have some legs but I don't believe we've seen the worst. The question I'm wrestling with is just how long it will appear that we have.

  • Is it bad that I called this chick a "bone smuggler" on TV last night?

  • You gotta fill out your Ben Bernanke Bracket. Someone is gonna win two tickets to the NCAA championship game in San Antonio (airfare not included). More details will be available Thursday on the 'Ville.

  • Further to that, we'll once again be hosting the Minyan March Madness Brackets this year (password: minyans). The winner will receive some snazzy schwag (and bragging rights) while the "non-winners" (there are no losers) will have the right-but not the obligation-to make a donation of their choice to my grandfather's most worthy cause.

  • During these trying times, we must remember to give back when we can (and only if we can). That's the Minyan way and, on behalf of Ruby, I offer you one of his patented winks ;-)

  • With regard to the Baidu (BIDU) short-side stab-we mused that the stock wanted to trade lower when it was up $4–the stock quickly fell $10 bucks and I peeled off half my puts (no, I didn't capture the entire move). I still have the other half on with the thought that IF we get the aforementioned probe (either before or after the rate cut), it'll be down double digits in a hurry. In the meantime, and in the interest of risk management, I've set my buy-stop at my entry price to avoid the dreaded Fletch syndrome.

  • More pressing, in my mind, is the broader market tenor. The news that seems to be buoying psychology (and was somewhat lost in the Bear Stearns shuffle) was the direct accommodation by the Fed to the brokers. That's big-we can debate the merits, implications and moral hazard involved, but it's significant in terms of loosening up liquidity.

  • Each trade has a life of it's own. One of the biggest mistakes a trader can make is not buying (or selling) something because you already traded it (or didn't) at a different level. Just because I missed Lehman (LEH) near $20 yesterday, I would have been pretty happy if I bought the close (near $30).

  • I don't know if A.D.D. make better traders or if trading make people more A.D.D., but for purposes of the bullet above, that very well may be to our benefit as we juggle the struggle and capture our prizes.

  • During a quick interview this morning, when asked about Goldman, I offered that good news that's not great is sold in overbought tape and bad news that's not horrid is bought in oversold tapes. Goldman was down 44% since October into this report. That fact, coupled with decent headlines, was reason enough for sigh of relief.

  • So, who bought those massive amounts of those Bear Stearns puts when the stock was north of $60?

  • Five words you never wanna say to a Bulgarian Blackbelt? "I want you to hit me." I was thinking of that scene in Rocky when Mick said "He's not getting hurt--he's getting angry!" I got both, in that order.


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