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Random Thoughts: Following a Massive Move

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Are bulls picking up steam?

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  • Given market volatility, this certainly isn't a good time to lose one's head.

  • We sensed that if Hoofy was gonna hit the hole, yesterday was his opening given hedgies relaxing their risk grip (after 1Q letters), monthly inflows on the mutual fund side, reaction to the early news (UBS (UBS), Lehman (LEH)) and well, Bonnie.

  • Hit the hole he did as world equity markets rumbled to the best second quarter start in 70 years.

  • SO, what now? After a more constructive stance into the Bear Stearns (BSC) news, we've been patiently eyeing resistance (S&P 1380-1405, DJIA 12,800) and it's coming up quick.

  • Boo will be quick to note that 1) much like housing, there's no way to pick a bottom in credit, 2) the sharpest rallies occur in the context of a bear market, 3) the VXO is getting back to the red line and 4) we've seen this movie five times this year.

  • I'm not drawing a line in the sand (the socialization/hyperinflation scenario is a possible path, particularly if the "mortgage trust" is created). I'm trading two-sided (short jabs, long hooks) and resting between rounds as 2008 is shaping up to be a long bout!

  • Feel free to use your nightstick officer!

  • Stuck in the middle with you? Manhattan apartment sales plunged 34% in the first quarter--the most in 18 years--while the median price increased 13.2%.

  • Transfer of wealth indeed! According to the FT, SWF investments (Sovereign Wealth Funds, not Single White Female) totaled about $25 billion in the first quarter of the year, well up on last year's $3.9 billion and about half the global volume racked up by private equity investors.

  • Why the heck is Portnoy so pissed? All he does is complain, complain, complain! Seriously... get over it dude, go out with someone else!

  • I don't "do" textbook definitions of recessions but wouldn't a first half contraction qualify as such? What will be will be, we know, I'm simply looking through the lens of Fedibility.

  • For the record and so it's said, the mustard yellow blazer I sported on Fox Business last night wasn't mine. It was a last second call to appear and I grabbed it off MV CMO Charlie Mangano's chair on my way out the door.

  • How many people are talking about deflation outside of Minyanville? While inflation is clearly evident (in things we need such as food, fuel, insurance and education), the market is a discounting mechanism for what will be.

  • Big Ben has officially recognized the interwoven derivative machination by acknowledging the potential fallout from a Bear Bankruptcy. That's good (from an "admitting you have a problem" standpoint) and bad (how many firms are too big to fail and how many fingers are available to stick in the dike)?

  • Answers I Really Wanna Know…


    • Is it really only Wednesday?

    • Y'all see the S&P tickling the underbelly of our resistance zone?

    • How about Baidu (BIDU) as it jacks to all-important resistance at $300?

    • Following the rally yesterday, was the probe higher intuitive?

    • Is a reversal lower the path of maximum frustration?

    • Isn't one of the first things we learn in this business that nobody--and I mean nobody--is bigger than the markets?

    • How do you spot a dead ringer?

    • Y'all see Aunt Fannie (FNM) and Uncle Freddie (FRE) slipping out the back door for a quickie dip in Red Dye?

    • When's the last time you did the mess around?

    • Has anybody seen Cody Willard and Kurt Cobain in the same room at the same time?

  • And, Just Sayin'…

    A few years ago, when drawing the parallel to the 1930's, we lost alotta Street cred. Now--after a massive credit deterioration--the IMF is saying that this is the worst financial crisis since the Great Depression.

    This is not a victory lap-it's not our style nor is it appropriate-but it's worth noting on a few levels.

    First, this is gonna be a long hard road fraught with two-sided risk, so the proper perspective is important. Second, it serves to remind us that herd mentalities (very bullish in 2006) tend to fleece sheep.

    The near-term is noisy and nobody is smart enough to game the tape day in and day out. Taking a step back often helps crystallize thoughts, however, so if you're spun around, there's no shame in doing just that.

    It's hard out there and capital preservation remains the first step towards prolonged profitability.


R.P.

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