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Morning Dew: Preparing for a Wild Session


Buckle your seatbelts, folks.


While today, in many ways, represents what we've been talking about in Minyanville for years---derivatives, dollar, debt, the GSE's Fannie (FNM) and Freddie (FRE), financial engineering, counter-party contagion, social mood, risk appetite, asset class disparities--we're not going to spend the morning looking back.

Indeed, while we must appreciate where we came from in order to understand where we are, the process of price discovery is underway as we ascertain where we're going.

A few Random Thoughts

  • There will most certainly be a bounce attempt this morning. How--and if--you play is a function of where you sit and how you stand. We've been saying for a few months that fair value on the S&P was considerably lower (S&P 1080) given credit conditions. That doesn't mean we get there in a straight line (or at all) but it's worthy of a mention as the hounds unleash.

  • I nibbled ever so gently on some USO calls on Friday as it approached $80 (and crude ticked below par). It's a small position as I was in capital preservation and exposure reduction mode into the weekend. I'm not going to rationalize risk but I will say that, as I expect rate cuts (as early as today), I'll likely add some initial exposure in that complex with the intention of paring the position into strength.

  • Capital preservation, debt reduction, financial intelligence. This is precisely what we've prepared for, Minyans--an inevitable comeuppance that, while unfortunate, is a necessary evil. Time and price are the only medicine for the cumulative imbalances that have built over time. As perverse as it sounds, I'm viewing this process as a positive step towards the "inside-out" recovery that ultimately awaits.

  • Be very careful today and understand that unforeseen crosscurrents, government intervention, forced selling and emotional decisions will dictate the day. Be in a position to use price to your advantage and understand that many people won't have that option.

  • Trade smaller. Define your risk. Don't let the definition of an investment be a trade gone awry. And most importantly, remain lucid and think before you act. There will be less players on the field at the end of the day. Our goal, as Minyans, is to remain on the roster.

Good luck.



Positions in USO, YHOO

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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