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Random Thoughts: Are We In The Clear?


Could it be? Is it that easy? Go with the flow?


There's alotta wide-eyed wonderment in the market these days as a function of the biggest two-day run since 2002. Heck, someone told me that some pundits who were screaming ARMAGEDDON on Monday came out on yesterday's close to opine that NOW is the right time to buy. Could it be? Is it that easy? Go with the flow?

Perhaps---I've seen stranger things happen---but a little perspective might be in order.

For one, yesterday's lift looked a lot like the action we saw on November 13th. If you recall, there was alotta newfound optimism then as well before we begrudgingly backed off and slipped lower.

For deux, we're still firmly entrenched in a series of lower highs and lower lows, which is negative (until it's not).

Finally, while sentiment did get negative (Economist, BusinessWeek), the simple truth is that uncertainties remain and it's difficult, if not impossible, to know the depth of the credit contagion.

There is a potential upside catalyst upon us, and that's the perception that foreign buyers will swoop in to scoop up stateside assets. The concept of "transfer of wealth" is old hat to ye faithful but as we know, we tend to be forward thinking in the 'Ville. As such, if the perception of foreign bids manifest, it could lend support.

I don't believe that's a savior, so it's said, but it could create a bridge between perception and reality.

Some Random Thoughts

  • I was biting my fingers this morning before saying that Citigroup (C) acted like it wanted to trade higher. There's a great article on the back page of the C-section in today's WSJ about a possible JP Morgan (JPM)-Citi alliance, which would be a full circle victory lap for Jamie Dimon (best in breed, in my humble opinion).

  • What am I doing? You mean other than grunting in pain following my early morning kickboxing? A bit less, honestly. I fed some ducks on the way up yesterday in Pulte Homes (PHM) and Schering Plough (SGP) while balancing my pad via some S&P puts. I'm trading around both sides, keeping my gimps on a short leash and snatching opportunities as I see them.

  • I watched the HBO special on the Mayweather-Hatton fight last night and I gotta say that I'm pulling for Ricky. He seems to be a tough cookie with a big heart and this should be one heckuva brawl if you like that sorta stuff.

  • Coop De Ville's Buzz earlier was spot on. When in doubt, sit it out or trade a bit less (or smaller). Capital preservation is the first step towards prolonged profitability.

  • "Citadel this morning reported it purchased E*Trade's (ETFC) entire ABS portfolio for $800 mln, that ETFC had previously valued at $3 bln. That is $0.27 on the dollar folks. Will the market breathe a sigh of relief that there is some money out there to buy this stuff or will this arms length transaction help auditors revalue mismarked portfolios?" Mr. Practical (who has a position in ETFC).

  • Parliament. Big Ben. Parliament. Big Ben. Mr. Bernanke is speaking tonight on the national economy and policy. That'll color the overnight action so keep it on ye radar.

  • Man of Manischewitz, (BIDU) was a primo example of premature evacuation! You're never supposed to complain when you ring the register (for an overnight $25) but woof, they're coming for these pups as vehicles of year-end performance anxiety.

  • The mindset of "trading to win" vs. "trading not to lose" is a massively positive perspective. Yesterday's news (and performance) is just that--rear view. The beauty of this business is that there is fresh redemption daily. Shake it off and be the ball!

  • Speaking of which (perspective, not balls), keep an eye on Citi and Goldman (GS) as they tickle the underbelly of the bulls. This complex is crowded and shrouded but it remains a key psychology proxy as we edge ahead. Why? Credit vs. Fed. Funny how the game remains the same, eh?

  • Thank you for the Ruby winks. Humbling stuff indeed.


Holiday Festivus is here! Come join us and support the Ruby Peck Foundation For Children's Education at an old-fashioned Southern-style hoe-down in the heart of New York City on December 7th. Click the image below to learn more!

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Positions in PHM, SGP, SPY, C
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