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Monday Morning Quarterback


Pointing an angry finger at the Fed is sorta like blaming Mr. Softee after you willingly consume an ice cream and agree to pay later.


"Do you wanna play tetherball?"
-Napoleon Dynamite

Good morning and welcome back to the jittery pack. Following a five-session span that saw more swings than a neighborhood park, we power up our weekly pup to find the pre-market futures firmly in the green.

It stands to reason, right? We saw intense two-sided volatility of late and the path of maximum frustration is best on all sides by market inequities and the tyranny of confused traders.

I've gotta lotta thoughts ruminating behind my Monday morning eyes so given our collective time constraints and in the interest of brevity, let's say a prayer, share the fare and wish ye well to bulls and bears.

  • The last thing that Hoofy wanted to see this morning was an "up opening (following the harsh Friday melt). In that vein, expect a probe lower and remember that the earlier we see (and absorb) it, the higher the likelihood becomes that it'll stick.

  • I scribed a late-day vibe on Friday regarding Minyan lucidity in the face of wildly emotional mainstream media swings. It wasn't written with acrimonious intentions, it was shared with hopes of providing context in this credit cycle and encouraging individual empowerment. You, and only you, will reap the benefit or assume the burden of your choices and the more you know, the better you'll flow.

  • Levels of Lore for traders galore? S&P 1450 (200-day) and 1460 (previous support) are initial resistance spots while 1490 (the lower end of the previous range) is the ursine backstop. S&P 1370 is the longer-term trendline support dating back to 2002.

  • The spotlight sector, as it's been in the 'Ville for a mighty long time, is the financials. They're the purest encapsulation of our finance-based economy, the genesis of all things smoky (derivatives, credit, hedge funds, counter-party risk, mark-to-market) oversold in the short-term and clearly due for a bounce. Broadening the lens always provides perspective, however, so remember that while the BKX has suffered double-digit losses this last month, it remains 67% above the 2001 low.

  • Be Careful for what ye wish. Remember when rates were jacking higher and the equity tape was trading in lockstep with the ten year? Everyone and their sister hoped against hope for lower rates to provide a respite. Minyans, for their part, were encouraged to ask "why" and "what" would necessitate lower rates.

  • In that vein and with that said, the retrenchment in rate-land may prove to be a powerful, albeit temporary, reprieve for the multitude of consumers tied to adjustable rate mortgages. While it might not prove to be an upside catalyst in the traditional sense, it'll likely quell the swell of downside delinquents.

  • By now, I'm sure that you've read your fair share on Bear Stearns (BSC) so we won't belabor the point. What I will offer, briefly, is that while Jimmy Cayne & Crew (sans Warren Specter) recently said Bear has hedges in place (and $11.4 billion in cash) against its mortgage-related positions, it isn't gonna use share buybacks to boost their stock. Actions speak louder than words and that, coupled with the "worst environment in 22 years", was the Freaky Friday wake-up call.

    The company also made a concerted effort to address its prime brokerage business, which is a huge component of their revenue mix. I would imagine that large funds that "clear" through Bear are paying pretty close attention to the happenings at the storied Wall Street firm. Will there be a "run" on this bank? It's a low probability affair but if it happened, it would be a boulder in the pond relative to the pebbles we've seen.

  • Big Ben and his Fed friends step on stage tomorrow. We've spoken about the Box Trot for a few years now as the FOMC is stuck between the desire for higher rates (to appease international holders of debt) and the need for lower rates (to simulate the finance-based economy). Some additional thoughts.

    • I believe the FOMC will stand pat and offer very little in terms of shifting their stance. Sorta like a deer in headlights.

    • The specter of help might keep a bid under the tape until the text hits the wires tomorrow at 2:15 EST.

    • Pointing an angry finger at the Fed is sorta like blaming Mr. Softee after you willingly consume an ice cream and agree to pay later.

    • The only solution (in both cases) is to watch what we eat and how we spend. Sustained physical (financial) fitness isn't a function of crash diets or newfound fads. It's about consistency, discipline and self-control.

  • Good luck this week Minyans-let's hit 'em hard and trade 'em right.


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