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Little Miss Sunshine


It would be easy to be very bearish right now if only it wasn't so easy to be bearish right now.


I feel the earth move
Under my feet
I feel the sky tumbling
Tumbling down

(Carole King)

Misery loves company. And for companies around the world, there is plenty of misery.

What started out as just another bipolar stroller turned from bad to worse yesterday when technical support broke for the market. We've been spying S&P 1490 for a mighty long time and, once it snapped in late afternoon trade, the inmates were left to run the asylum.

On any normal day, such an event would warrant a full blown discussion. In the context of what's going on around the globe, it's necessary to view this element through the collective lens of the four primary metrics: technicals, fundamentals, structural and psychology.

The recent price action seems to validate a cohesive assimilation of this fearsome foursome. We know that earnings are moving in the wrong direction, imbalances have been percolating and we're seeing an adjustment of the aggregate risk appetite.

It would be easy to be very bearish right now if only it wasn't so easy to be bearish right now.

I snuck a quick schnitzel last night with some of the smarter folks I know in finance. I listened as they mused on the comeuppance of cumulative pressures and found myself nodding in agreement. Indeed, as any card carrying Minyan will attest, the only surprise is that this downdraft has come as a surprise to so many.

The question we must weigh isn't what we know or don't know, it's what others perceive to be. Therein lies the most basic element of money management: capturing the disconnect between perception and reality, which occurs across various time frames. It's easy to pick a direction or identify an applicable horizon. Nailing both is an entirely different matter and one that's proven elusive for Boo and his crew.

There is tremendous uncertainty right now as we wade through the financial equivalent of an earthquake. Everyone is holding on, hoping that the tremors will pass but nobody knows for sure. And there's no way to know, given the derivative underpinnings, there are simply safeguards that we can employ just in case.

Capital preservation, debt reduction and financial intelligence are cornerstones of stability regardless of the seismic shifts.

Discipline over conviction, Minyans, as we rock back and forth.

Random Rumblings

  • What stood out to me yesterday? Both the greenback and equities were down in sync. We've been espousing the lens of "dollar devaluation vs. asset class deflation" but have been consistent that they're not mutually exclusive. Sorta makes you wonder if a stronger dollar will be reactive in nature.

  • Seriously, when rappers and supermodels are shunning the buck, doesn't the trade seem somewhat crowded?

  • Aunt Fannie (FNM) (is it finally unwrapping this monster?), the 50% widening in Washington Mutual (WM) credit default swaps and the fact that high beta has yet to correct were also battling for mindshare as I wrapped up yesterday's session.

  • After the close, Morgan Stanley (MS) took a $3.7 billion charge and AIG (AIG) suffered more of a swipe. The former stressed that the write down was from residential mortgages only (and the derivatives thereof) and the latter seems to be in hope mode, with massive Level III investments relative to its equity capital base.

  • The Morgan Stanley statement invoked imagery of management trying to contain a virus before it escapes a particular town. Sorta like Outbreak sans the cute monkey.

  • By some measures-or, should I say if some regulatory measures were enforced, one could make the case that Wall Street is insolvent.

  • The term "too big to fail" comes to mind, which explains why global central banks unleashed the liquidity hose this summer and the Treasury has been pushing the super-conduit emergency plan ever since (while telling us not to panic).

  • Hoofy would offer that Wall Street firms are being proactive in taking their lumps ahead of FASB 187. It's what we'll call his "Kitchen Sink" thesis, one-and-done mea culpas that pave the way for bigger and better things. It's out there and we always gotta watch both sides of the ride.

  • General Motors (GM) is General Electric (GE) is Target (TGT) in a finance based economy. The financials are vulnerable but quite crowded. The second and third dominoes are just a few steps down the food chain.

  • Just because someone screams louder doesn't make their message more credible. I would actually take the other side of that.

  • Please toss HSBC (HBC) on your short-side radar as I've heard it mentioned by too many sharp cookies to ignore.

  • Scotto Reamer said something yesterday to me that made alotta sense. Bull markets create wealth and bear markets concentrate wealth. There is a correlation there between the "haves and have nots" but to be honest, I was too fried to bring it home.

  • In the interest of full and forthright disclosure, I scribed this vibe deep into the night such that I can treat myself to an early morning arse-kicking by my trainer. If you see Lloyd Dobler, tell him to be afraid. Very, very afraid.

  • I'll see you on the Buzz, Minyans. If you don't know what the Buzz is, check it out! Hey, I'm not upselling, I'm just telling. There are alotta angles to Minyanville and that's alright. Angles lead to spectrums, spectrums to prisms and, if we're lucky, prisms will create the rainbow that we'll together climb.

  • Good luck today.


Holiday Festivus is here! Come join us and support the Ruby Peck Foundation For Children's Education at an old-fashioned Southern-style hoe-down in the heart of New York City on December 7th. Click the image below to learn more!

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