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Buzz Bits: Dow, Nasdaq Surge

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Jungle Boogie! Jungle Boogie! - Todd Harrison - 3:56 PM

Pop Quiz!

Whataya get when you commingle a cornered animal, a big gorilla, several large elephants, thinning ranks, curious bids and hidden trap doors? Outsized volatility, for one, and reactive decision making for deux. We' see the emotional swings on television (as a function of price) and I'm hearing 'em in the Street. Folks are confused, and for good reason.

I've received a ton--and I mean, a ton--of mail today regarding today's opening vibe and the collective tone seems tenuous at best and anxious at the core. True bear markets are frustrating and haphazard, flummoxing everyone--including Boo. Welcome, my friends. Welcome to the machine.

Perhaps the fact that I believe we're in a bear market is a leap of faith (or lack thereof). Indeed, one Minyan said to me today that the dollar is gonna collapse and rates are gonna rocket. "OK," I said, "but in that hyperinflationary environment, can't stocks rocket higher?"

I'm just thinking out loud here and trying to see all sides. Days like today lend themselves to introspection and while I don't profess to have the answers, I'm trying to ask the right questions. I do so not in a "flip flop" way---I'm still trading around the short side with a stop above BKX 111.50 way--but in the interest of seeing both sides to every trade.

Either way and anyway, one of the longest sessions in recent memory comes to a close as we straddle the other side of the weekly hump. I've gotta tell you, I'm not sure if I've ever (and that's saying a lot) traded, written and met more in a span of six weeks than I have during this last stretch. It's tiring stuff but alas, it's the journey we've chosen.

Hoppin, friends---I'll see YOU in the ayem.

R.P.



A Little Minyanville Chatter - John Succo - 2:07 PM

Professor Herb Greenberg asks: Why didn't the banks go to the window without needing prodding? What does that say?

Some banks did, but the big banks are still ok... so far. But this thing ain't stopping, the Fed is just delaying. IT has begun.

Look back at 1973. That was last time there was a credit crunch. The government responded similarly. They thought they could control markets, so Nixon went off the gold standard and that created higher interest rates... which will happen again.

Lower dollar = higher rates.

We need a 70's type correction to wipe out bad debt. It will be painful but the only way. The government is too big. The response is to get bigger but it only makes it worse.


Who Is On Point? - David Nelson - 11:51 AM

Ok, now that most money managers and investors are hiding in Microsoft (MSFT), Johnson and Johnson (JNJ), General Electric (GE), and Bank of America (BAC), what now?

Most investors do not like to make the big macro call but unfortunately won't be able to avoid it.

If you are of the opinion that we have entered a bear market phase, than these positions are correct and you will weather the storm with little damage.

If however you feel this is a financial panic that will right itself in short order than it is imperative you get back into the names that have led the bull market for the last few years. Your assumption must be that global growth will continue and stocks that rank high in most quant models are the beneficiaries of this view point. You know which ones I am talking about, stocks such as Freeport-McMoRan (FCX), Companhia Vale do Rio Doce (RIO), Foster Wheeler (FWLT) etc.

The models of these large quant funds aren't flawed but the leverage is.

If we are truly going to resume the Bull Market, Pepsi (PEP), Microsoft (MSFT) and Johnson and Johnson (JNJ) probably aren't going to lead the way.



What's Going On? - Adam Katz - 10:06 AM

Fed Funds Futures and now, from what I understand, pricing in a 90% chance of a 50 bps cut next month. The equity markets seem to be following that lead. There may be a little too much good news priced into this market in the very near term given the Feds resistance to cutting the Fed Funds Rate.

Improvements in the CDS markets this morning and the sell off in treasuries is encouraging in the intermediate term for equities, but we could see some pressure on equities emerge due to profit taking. in the very near term (today, tomorrow, Friday) we could see some pressure on equities as this last move up was prompted by the notion that the Fed is almost certain to cut rates.

That psychology is so paramount that Fed Funds Futures have now priced in a 50 bp cut by September. I think the market can, over the next couple of days retrace as the markets stabilize and the street loses its confidence that such a drastic rate cut will happen so soon.

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