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Random Thoughts: Lucidity NOW!


Traders are looking for clarity as the tape stutters.

Editor's Note: The following was posted in real time on our premium Buzz & Banter. It's being shared here for the benefit of the Minyanville community. See also Chicken Little Skinned?, Two Wildcards to Watch and Snapper Steps Up.

How do I tell them that due to the unfreezing process, I have no innner monolouge? - 10:49 am

The following are the very first things to flicker behind my tired eyes as we edge through the first hour:

  • In the interest of forthright communication, I very much wanted to remove that "arm" from the bull costume (leaving both legs, or 50% upside conviction) after the Spooz rallied 84 handles in 15 minutes and the NYSE floor cheered as if the war was won.

  • Alas, I can't type that fast (I'm trying) so please understand that while I'll suck it up, so to speak, that was my intention, metaphorical imagery aside. The first Snapper, as we mused this morning, was the easy trade.

  • Two that got away this morning but remain on the tradable shopping list? The EEM (i-Shares emerging markets) and BHP Billiton Ltd (BHP).

  • Pop Quiz: How do you make Herbert Hoover look like a genius?

  • While we don't "do" rumors in the 'Ville, chatter abounds that the market will be closed on Monday as Christopher Columbus explores alternative market solutions.

  • My single biggest concern is the "on the fly" trillion dollar decisions being made by our "leaders." Leaders are proactive, followers are reactive.

  • Again, be very careful with options. Between the jacked level of volatility and wide spreads, it's a dangerous, dangerous market to be trading right now.

  • Jugglin' lots, as I know you are, so lemme hop as we chop through the slop.

Ah, sloppy Sue and Big Bones Billie, they'll be comin' up for air... - 11:49 am

  • It's killer how many pundits have suddenly found religion in "deflation," "credit crashes" and the second coming of Depression.

  • Not being saucy--OK, maybe I'm being a little saucy--but it's a tad sad that the mainstream media is highlighting these issues after the fact. Therein lies the value proposition of Minyanville: The financial news you need to know before you know you need it.

  • I offer this with a conscious nod that I've been early to my trading try. That risk is still open, however, and it's being made with cash hoarded while many of the above pundits were advocating exposure at much higher levels. No salt here, just sayin'.

  • World, Hold On! Remember a few weeks ago when I mused that they could close the market as they figure this all out? Italian Prime Minister Silvio Berlusconi informs us that this may indeed be a possibility on a global scale.

  • Green beans in the Red Sea? Apple (AAPL), eBay (EBAY), VMWare (VMW), KB Homes (KBH), Wachovia (WB) (special situation) and The New Bank of America (BAC) (which includes BAC, Citigroup (C), JPMorgan (JPM) and Wells Fargo (WFC)).

  • The Truman Show beckons so lemme hop. As always, I hope this finds you swimming in smiles. Thanks, Boss.

Lucidity NOW! - 12:35 pm

These are trying times indeed and through the lens of "this too shall pass," I offer the following guidelines for ye faithful:

  • This is precisely what capitulation feels like, it's the diaper effect, also known as "get me out at any price." Price discovery is a process not a point, we know, so keep that in mind as we edge ahead.

  • Only trade with what you can afford to lose. That comfort margin is distinct for each Minyan and therein lies the "know thyself" rule.

  • Sync your time horizon and risk profile. That will ensure you're in a position to cash your chips when the time is right.

  • See all sides. While I'm of the view that there will be better prices with which to make sales, allow for the possibility that there won't be when you're making your financial decisions. You should never be one trade away from the poor house.

  • Never Forget! If and when the MOAS (mother of all Snappers) arrives, remember how you feel right now as you shape and craft your future risk profile.

This is what we've trained for, Minyans. The last six years of Minyanville have preached the importance of risk management over reward chasing, capital preservation (a fluid discussion), debt reduction, financial intelligence and, perhaps most importantly, emotion is the enemy when trading.

To be sure--and most unfortunately--not everyone will make it to the other side of the beach head. It's our sincere hope that Minyans, through the lens of proactive preparation, are in a better position than most. Take a deep breath and be a part of the solution rather than part of the percolating problem. We will get there, and we'll get there together.

As always, I hope this finds you well.


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