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Random Thoughts: Is The Big One Coming?

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Market is running out of quick fixes.

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The market is rumbling and absent the implicit Government guarantee-which differs from the explicit guarantee we saw on Sunday-the question is simple:

Who will step in and save the day?

We've long discussed the laws of diminishing ammunition, offering that the last bullet would be pointed inward.

Using another analogy, leaks are springing all over the financial dam and there are only so many fingers to plug those holes, particularly after two fingers-the middle one on each hand-were used on Sunday.

Faith in the system--credibility, psychology, perception, social mood and risk appetite--is paramount here.

We've been watching it closely for a long time but the shelf life has seemingly shortened.

I'm not smart enough to know if this is the big one or simply a case of Turnaround Tuesday shaking the tape.

What I will say-and as we have said- is that credit problems persist, debt needs to be destroyed and equity markets aren't pricing in that risk.

Either the former improves in time to absorb the year-end issuance or we're in for a harsh comeuppance that will remind the world that profiting is a privilege rather than a right.

Discipline over conviction as we find our way.

Random Thoughts:

  • Jeezums-WaMu (WM) down 20%, Lehman (LEH) off 35%... AIG (AIG) down 12%! It sure didn't take long from the psychology to shift from "First Down" to "Billions to go..."

  • I don't frighten easily-I'm a Raider fan and their performance last night was scary-but seeing what I'm seeing, with the VXO at 25, is freaking me out a bit.

  • Is someone at Goldman (GS) getting a call from someone in Washington about something like Lehman (LEH)?

  • Hey, I'm just asking… I mean, it's not like this sorta stuff doesn't happen!

  • Cough Bank America (BAC)-Countrywide Financial.

  • Cough JP Morgan (JPM)-Bear Stearns.

  • Cough Our children, Fannie (FNM) and Freddie (FRE).

  • Don't hate the player (hate the game) and don't shoot the messenger (shoot a note to a loved one).

  • The ability not to trade is sometimes as important as trading ability.

  • There will be better times, easier tapes and tremendous opportunities in time. The goal is to be in a position to capitalize (pun intended) when the time comes.

  • You know what sector trades well? Consumer non-durables, as we've discussed of late (and highlighted in our ten themes). Campbell Soup (CPB) will report tomorrow and its margins will tell us if this thesis is mmm mmm good.

  • Keep half an eye peeled towards the dollar as it reacts to the level that Professor Fil noted yesterday.

  • What am I doing? I sold my General Electric (GE) and Wachovia (WB) puts (discussed yesterday) and took the trade in Coca-Cola (KO).

  • I'm generally in a "do less" mindset, which means smaller positions and tighter leashes. Hit it to quit it and preserve capital.

  • It's not sexy, I know, but then again, what is?

  • The doors to Festivus 2008 are officially open! Lock your spot for the critter trot as last year's soiree sold out. This is our annual event to commingle our professors, partners and Minyans while chowing down and listening to live music. The very best part? It's for the kids in the good name of my grandfather.


R.P.

No positions in stocks mentioned.

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 todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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