Randoms: Dancing on the Widow's Peak
The year of the "W" searches for an apex.
- We spoke last week of the 2009: The Year of the W (and we're somewhere near the middle peak) and that remains my best guess in terms of how this year will appear with the benefit of hindsight. Please keep in mind that this is one man's humble opinion so please see all sides when assessing risk.
- The above words were chosen carefully--assessing and managing risk (as opposed to chasing reward) will invariably serve you in good stead. How you lever that process is distinct to each Minyan and I'll ask that you respect both sides of our Wishbone World when making financial decisions.
- The financial stress test (scheduled for today but postponed until) Thursday is the bogie on this week's radar. While we know select elements (at least six banks need better capitalization), I'll again remind you that in a finance based derivative laced global machination, we're only as strong as our weakest link.
- Counter-party risk. See it, before you hear it. It applies to the stress tests as well as a potential unintended consequence of bond holders rolling their dice in bankruptcy court rather than cutting deals on the Beltway. If Chrysler set a precedent, the implication for General Motors (GM)--not to mention a slew of banks--could very well percolate.
- When the Critters won the Emmy in December, we spoke of how it was in poor taste to champion accomplishment when so many were struggling throughout the societal spectrum. That continues to manifest and I'll again point it out for one reason: social mood and risk appetites shape financial markets.
- Seeing both sides, couldn't you make the case that Gold has massively bullish reverse dandruff through a longer-term lens?
- While the Swine Flu has spread to 30 states and 20 countries and the declaration of a full-fledged pandemic is imminent, according to the World Health Organization, reports of a slowing mortality rate and word from Mexico that the outbreak "probably peaked last week" has quelled fears, at least for the time being. Officials remain "particularly concerned" about what will happen when the flu season starts in the Northern Hemisphere in late September.
- I remain light and tight as we traverse what I perceive to be the widow's peak of the 2009 "W." I respect the power of perception (acne above S&P 875) and understand we can rally further (while remaining in a defined bear market downtrend) but believe we'll see the rally exhaust itself this month and will attempt to use price to my advantage to establish short-side exposure.
- Put a water pistol to my keppe and say, "When would you fade (sell) this perceived false breakout?" and I would respond, "Turnaround Tuesday is as an intuitive an inflection as any, if only for a trade." With that said and respected, I'm not opposed to nibbling on some partial downside exposure as long as it's in the context of defined risk.
- I've done so with some financials and a snivlet of SPY in and around S&P 900 but will be quite tight as there is "room" to S&P 950, where the downtrend line (from last April) and 200-day moving average converge.
- This column by Minyan Peter about managed bank earnings is a tremendous insider's take on a touchy topic.
- The 9:05 Buzz by Professor Goepfert is consistent with something my brother John Succo said to me years ago. Rising savings rates are bullish in bull markets (as investors accumulate wealth as a cushion) but bearish in bear markets (as they're a sign of hoarding and risk aversion).
- What does your favorite Grateful Dead song say about you?
- Call me old school but I'm a free market guy. I understand there were people that abused the system and I'll be the first person to sit on a jury and judge them for their transgressions.
- While this may be a moot point following the Martial Law for the Markets that brought us Back to the U.S.S.A., we the people must draw a line in the maze of moral hazard. Convicting people in the court of public opinion, whether it's a CEO that was threatened by the Treasury Secretary or bond holders with a fiduciary responsibility to their investors, is endemic of the problem rather than a path towards a solution.
- Red beans in today's Green Sea include Amgen (AMGN), Cisco (CSCO), Pepsi (PEP), Microsoft (MSFT), Oracle (ORCL) and Yahoo (YHOO).
- Keep the faith, Minyans, for this too shall pass. We simply need to watch each other's back and do things the right way as we edge our way through this prolonged period of socioeconomic malaise if we hope to let the sun shine.
- As always, I sincerely hope this finds you well.
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 firstname.lastname@example.org.
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