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Random Thoughts: Risk Rotation at a Critical Junction


Prudence is needed in such a market.

  • Gangsta Gangsta! It's not about a salary-it's all about reality.

  • Someone said on TV that the US Economy will be the first to recover.

  • I humbly disagree-I believe that, much like the Internet prophecy came to fruition (albeit not without a tech crash first), globalization will play out much the same way (after the debt crash).

  • That's what we've dubbed "the outside-in" recovery and yes, it's years away. Minyanville was branded Cassandra in 2005 and 2006 and we'll likely be considered Pollyanna in 2011 or so when social mood is really punky.

  • I unwound 67% of my USO calls into the opening blink-and-ya-missed it upside blink.

  • Why? The longer the crude migrates under $110, the less likely it is to squirt through to the upside.

  • That, coupled with my larger picture deflationary sense, warranted dear prudence.

  • Should it melt to par $100, I'll back up the truck for the first bounce.

  • I stumbled across this oldie but goodie. Old School Minyans will remember it and newbies might enjoy it. So? I share it.

  • Disciplined is a two-sided sword, as evidenced by my punting my American Express (AXP) puts (-4%) and Baidu (BIDU) puts (-2.5%) yesterday.

  • That discipline has saved me many times over the course of my career, however, so hold the corks, hide the forks and let's focus on the next, best step.

  • What's a socially liberal fiscal conservative to do? Honestly not sure but it makes for great media as we find our way towards new leadership.

  • Two massive levels in the market are S&P 1260 and SOX 330. Both are at risk of being violated like Andy Dufresne in a Shawshank shower.

  • The bull case for consumer non-durables such as General Mills (GIS), Coca-Cola (KO), Heinz (HNZ), Johnson & Johnson (JNJ) and Clorox (CLX) is that input costs are way down and that costs savings won't be passed through to the consumer (which would naturally help margins).

  • Pep touched on this yesterday and it's primarily why this was one of our ten themes for 2008. What remains to be seen is whether those gains will be relative or absolute.

  • I nibbled on some Coke calls (November paper) based partly on the price action (green bean in a red sea), partly on the above discussion and partly because it's the one name in that complex that is well off its high.

  • What Else, Prey Tell? Some starter put positions in Sears Holding (SHLD) and Wal-Mart (WMT) (October and November paper, respectively). They're not big bets-Sears is notoriously hard to borrow-but it's consistent with my Retail Therapy vibe-or, the likely need for retailers to seek out a therapist this holiday season.

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Positions in KO, USO, SHLD, WMT
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