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The Moment of Truth


The market must schvitz or get off the pot.


"Life comes down to a few moments. This is one of them." --Bud Fox, Wall Street

Technical Analysis 101 dictates that the time to buy a breakout is when it retests the acne level (where it originally broke out). As monitored in Minyanville the last few weeks, S&P 875 is that level of lore for traders galore. Once mounted, it offered upside affirmation while paradoxically setting the stage for a fresh spate of ursine rage.

There are vicious crosscurrents currently making their way through global financial markets. Between the European Union's beef with Intel (INTC) to government initiatives to regulate derivatives (a net positive through the lens of transparency but rife with unintended consequences) to the unavoidable truth that this rally, like the post technology bubble lift, is more synthetic than steroids.

Again, hands over eyes from 40,000 feet, the destruction of debt is the only true medicine for what ails us. Attempting to induce more debt, rather than let the meritocracy for free markets do what they're designed to do, is akin to swimming backwards. It also moves the needle away from eventual globalization towards the specter of isolationism, protectionism and geopolitical conflict.

If you held dollar denominated assets since 2002 and were down 32% on top of the destruction of wealth in the underlying assets, how would you feel? Pretty pissed, I would venture, which could manifest in many ways. Toss the surly stateside social mood and the seismic shifts in the capital market construct and you've got the recipe for something prickly.

Given a multitude of technical inflection points-including the dollar sitting slightly below massive support-the onus is on us to see both sides and manage risk rather than chase rewards. Opportunity cost is the other side of discipline and we would be wise to remember that regardless of which way the next 5% plays.

Financial staying power remains the catchphrase of 2009 for there will be massive opportunities once the dust settles following this prolonged period of price discovery.

Our goal, as Minyans, is to be in a position to prosper once they arrive.

Random Thoughts:

  • We shared some stories from the Minyan front lines yesterday; anecdotal opinions that the "real world" is getting worse not better (as the popular press and policymakers would have you believe). I bring this up for one reason: social mood and risk appetite shape financial markets.

  • We've said it 1000 times and we'll say it again for no other reason than the only difference between a mistake and a lesson is the ability to learn from it. The crash didn't cause the Great Depression; the Great Depression caused the stock market to crash.

  • My instant messages lit up yesterday that someone on CNBC asked the question "WWBD" (What Would Barney (Frank) Do?"). I would be remiss if I didn't take a moment to remember our fallen friend-and the real "B"- Bennet Sedacca. Indeed, I miss Blue Steel's thought process right about now.

  • A Minyan asked my view of Gold and I referenced the recent discussion we had about the vicious variant views. At the end of the day, the yellow metal is still in a (bearish) pattern of "lower highs" although, seeing both sides, one could argue that it's tracing out some longer term (bullish) reverse dandruff. Helpful?

  • Tape-wise, my stylistic approach remains "sell blips to buy dips" rather than "buy dips to sell rips." I'm doing so with a scalpel not a sword, as strategic trading makes sense given the confluence of crosscurrents.

  • I spent a half hour on the phone last night with the Margarita Maven (my gorgeous grandmother) and she's as sharp as a tack and chock full of spirit. She informed me the Hard Rock now offers Blackjack thirty minutes from her home so I'm gonna make my way down there shortly to spend time with one of my greatest blessings. I've learned in this world not to take anything for granted.

Answers I Really Wanna Know:


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