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Randoms: Buy the Rumor, Sell the Fumes


Keep your risk profile tighter than a snare drum.


Editor's Note: The following was posted in real time on our premium Buzz & Banter (click for a free trial). It's being shared here for the benefit of the Minyanville community. See also An Allusion to Depression? and D-Day on the Beltway.

Stop The World I Wanna Get Off! - 12:11 pm

The "sell the news," as alluded to in a previous Buzz, arrived in full force and the question on the lips of the critters is "What now?"

Some honest vibage as I try to do too many things at the same time:

  • I sold my Goldman Sachs (GS) puts into this Art Carnage. Covering shorts is a natural "in between" in the battle of bulls and bears.

  • I tried to pick at some Bank America (BAC) in and around $5.65 but A.D.D.'d my way out of a fill. I'm not opposed to nibblin' a bit (-15%) but I haven't done so as a function of time management, or lack thereof.

  • It's always good to see Monsieur Succo in the 'Ville. His Code Blue column is tremendous context for those trying to wrap their head around what's happening.

  • The Invisible Hand may be Hoofy's single greatest ally today as Washington most certainly wants to avoid the perception of immediate failure of the bailout package.

  • OK, I nibbled on a lil' BAC as a place holder, at least until I can chew through this Buzz. Ditto some USO as crude drifts through Red Dye. Research in Motion (RIMM)? Maybe small--pure eyes--but I'm a better buyer anywhere near $50.

  • Net/net, if we're gonna see a bum rush higher, it's gotta start soon. I'm not opposed to trying it but I plan to be tighter than a snare drum with my risk profile.

  • Lemme jump, jump, everybody, jump, jump...

Answers I Really Wanna Know... - 12:52 pm

  • Is there a certain symmetry between today's government announcement and word that gun dealers are experiencing a shortage of bullets?

  • Is there anything to the 25% one week rally in Boots & Coots (WEL)?

  • If you get confused, just listen to the music play?

  • Have I been clear that, following my long positions (into today) and short stab (this morning), the current sniffle to the upside (Bank of America (BAC), Oil ETF (USO) and yes, some Research In Motion (RIMM) all have uber-tight trailing stops on 'em?

  • Why do I have to be so difficult, being bearish when everyone's bullish and bullish when everyone's bearish?

  • You think that's why I'm not yet married?

  • Did someone sneak in my closet and replace all my clothes with the exact same clothes one size smaller?

  • Is the higher dollar the single most curious thing on our screen given Dr. Evil's cameo?

  • Is China the quietest six-week 25% rally of all-time?

  • Oh by the way, did you see that the Senate just passed the $838 billion financial stimulus package?

  • Anyone else losing track of all these zeros?

Crash Test Dummies - 2:06 pm

Alrightee then, with my weekly missive (The Future of Wall Street, coming soon to a screen near you) officially off my plate, I turn my splintered attention back to the shack. I'll tell ya, for as much as I love trading, there is a profound element of risk to this market. That doesn't mean we can't trade it, mind you, it simply means we must operate through the lens of risk management.

With that in mind:

  • Snapshot (don't blink)! My current risk profile is hanging with Hoofy, with the meat of my exposure added in and around here (S&P -33, INDU -330, BKX -11.5%). Vehicles include Bank of America (BAC), Wells Fargo (WFC), Research in Motion (RIMM), USO and, for the first time FAS (banks on roids, consistent with the NYC social mood).

  • Please note--and this is critical--that I'm operating with trailing stops on every single ounce of the aforementioned exposure. Should the tape drop to ultimate support (zero), my loss today won't inhibit my ability to feed Phoebe the cat tonight.

  • I also have a placeholder Yahoo (YHOO) position, which I sold most of yesterday but wanna keep a smidge on my sheets.

  • My best guess sense is that we'll see at least one Snapper attempt before the dust settles (which is worth noting as contra-hour arrives). I don't think they'll have the moxie for a MOAS (Mother Of All Snappers) but we'll take that journey one step at a time.

  • The benefit of my stylistic approach is that I'll profit if it does but protect myself should we melt.

  • For what it's worth and so it's said, Ron Paul is the only politician who seems to understand what is happening and why.

  • Man, I sure feel sorry for the dude who has to guard me tonight on the hardwood. I don't have mad skills from the perimeter but you would be hard pressed to find anyone on the court who cares more about defense and rebounding. There's a lesson in that, somewhere, I'm just too tired to find it.

  • As always, I hope this finds you... here!

Was that seat hot or what? I feel like a Whopper. Turn me over, I'm done on this side! - 2:54 pm

  • Yeah, my game is modeled after Old School Oak. Enter the paint at your own risk.

  • Speaking of risk--Jeezums, look at this tape! My first blush thought was "If this is the contra-hour rally, I don't wanna be around for the final hour of reality TV."

  • My second thought was that FBI Special Agent Renee Walker (aka the PPT) is waiting until the end of the day to push the button.

  • My third thought was "Dude, you think to much. There's pensive and then there's carnival. The first is fine, the second will drive you nuts."

  • The net of all those thoughts, as they relate to my risk profile? Well, nothing, yet. I've set trailing stops on my upside tries and while I'm losing money at present (always honest), I'm still in the game through the lens of defined risk.

  • Win, lose or draw, I'll be smaller by days end but timing, as they say, is everything.

  • Man, I had the greatest Youtube Charles Oakley montage queued up but I self-edited for a change and left the gangsta rap off the 'Ville (lest Mini-Minyans are hanging close by).

  • Breathe, Yo, a little levity goes a long way, now more than ever.

Eyes of the World - 3:40 pm

  • I've unwound the Research in Motion (RIMM) try. In hindsight, it was perhaps an emotional try as I watched it rally sans me the last 20 points. Everyone trips in this tape, the key is not to fall.

  • In other words, the definition of an investment should never be a trade gone awry (good traders know how to make money, great traders know how to take a loss).

  • As discussed earlier, my overnight book will be lighter than my intraday exposure although I plan to keep some financials. While my "official" stance is "discipline over conviction, that doesn't always have to mean "flat to the share."

  • Make no mistake, every day is a dog fight (not in a Michael Vick sorta way, in a "you gotta be on your game" sorta way).

  • Scary thought: What if the PPT is out there today?

  • From a trading pal: "Downside volume on the NYSE is currently running at 95%. In Lowry speak, that suggests supply is still around and continues to overwhelm weak demand. Historically, however, you often see a 2-5 day bounce following a 90% downside day."

  • I "hear" the mark-to-market argument, particularly if there is a central, governing body that "marks" on behalf of the banks (with full transparency). While I agree that would trigger a massive rally, the government would have pricing power for the entire financial marketplace. That isn't free-market capitalism, it's socialism. Just so we're all on the same page...

  • The upside to all this? Back to basics in terms of perspective, having gratitude for what you have and appreciating the little things in life. At least for me or, at least that's what I continue to strive towards.

  • Ring the bell, please!


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Position in BAC, USO, RIMM, WFC, FAS, YHOO
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