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Random Thoughts: Danger Will Robinson


In turbulent times, information must be made redily available.


Editor's Note: The following was posted in real time on our premium Buzz & Banter. It's being shared here for the benefit of the Minyanville community. See also Back in the U.S.S.A.!, Which Way Will We Go?, Scary Mary, Why Ya Buggin'? and Will the Wheels Hold on the Wagon?

Unintended Consequences - 2:55 pm

Someone just asked me if the Oil spikes were due to anxiety over the bailout plan. I offered the following thoughts:

  • Commodities are spiking on the prospect that we've jumped the shark from deflation to hyperinflation.

  • Since 2002, asset classes have risen as the dollar lost 40%.

  • That process reversed when the debt bubble popped, which is why the dollar rallied and commodities lost 25% of their value since July into last week.

  • The action in crude isn't anxiety that the bailout won't work-it's an unintended consequence if it does.

  • Foreign appetite for the dollar as the world reserve currency remains the single biggest determinant of the success of this initiative.

These Eyes Have Seen Alotta Love But They've Never Seen Nuttin' Like This!

  • The action in the financials (Wachovia (WB), Wells Fargo (WFC), JPMorgan (JPM)) speaks to the notion that what ails the sector isn't a function of short-sellers as much as the systemic risk.

  • SPY $120.60-if technical analysis still works (given the structural shift in the market), this level 'should' hold once it fills the gap from Friday's opening.

Do Buybacks "Matter?"

  • Microsoft (MSFT), Nike (NKE) and Hewlett-Packard (HPQ) all announced buy-backs today.

  • This is precisely what we prescribed as a "best case alternative" for Microsoft when it was debating what to do with the war chest.

  • They are a positive step but it is in no way a panacea for our structural ailments.

  • Indeed, I expect to see MUCH more issuance and insider sales (particularly in the financials, as per Minyan Peter on Friday).

And Finally, in the "Weirdness Department"...

  • We've spoken about Pakistan and drew the analog since they banned short sales in June.
  • As a follow-up, I began to track that versus the S&P.

  • The Karachi initially rallied 12% (versus the 11% rally of the Thursday low in the S&P).

  • From there, Pakistan fell 28%. IF the S&P follows suit, it would take us to... are you ready? S&P 9-11.

  • Strange indeed (and here's hoping that history doesn't repeat or rhyme).

Holy Smokage! - 3:36 pm

Some Minyans are wondering why my recent Buzz posts are flowing to the News & Views. The answer is simple--during these turbulent times, we wanna make our financial information readily available.

Minyanville is an inclusive financial education community and we're in mission critical mode. When things settle, we'll return to our regularly scheduled programming. Thanks kindly for understanding as we do our part to give something back.

With that said...

  • Mark Twain once said that history doesn't always repeat but it often rhymes. While my sincere hope is that the Karachi-S&P analog does neither (it would "work" to S&P 911), I learned a long time ago that hope isn't a viable investment vehicle.

  • Once upon a time, when market "tells" mattered, we could point to the action in the financials and the bunk breadth and say "Danger Will Robinson."

  • That doesn't mean we can't rally but with the double whammy (stock buybacks halting and redemption notices hitting) looming at 3:30 EST, I've opted to err to the side of caution.

  • Opportunities are made up easier than losses, we know, and I'm reminding myself of that fact as I watch Target (TGT) (-5%) and Sears (SHLD) (-6.5%) take it on the chin.

  • Hoofy is getting waxed on the equity reversal (we're now back to where we were Thursday night--incredible) as Boo gets smoked in the commodity complex.

  • Welcome to the bear market, Minyans, where mercy knows no friends other than capital preservation, debt reduction and financial intelligence.

  • Just as I was ready to do my afternoon Truman Show hit for Fox Business, MVHQ technology went on the blitz.

  • Jeez Louise, Mercury Retrograde doesn't even start until Wednesday! (We're back up now but I'm biting my lip as I write this).

  • On that note, lemme jump. As always, I hope this finds you well and mindful of your blessings rather than lamenting your losses. Fare ye well into the bell and be strong--you're a Minyan.


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