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Freaky Friday Potpourri: He Said, She Said


Moral hazard manifests in the financial fabric.


"It's 106 miles to Chicago , we got a full tank of gas, half a pack of cigarettes, it's dark, and we're wearing sunglasses." --Elwood Blues

I used to think traveling was sexy, hopping from city to city and seeing the world. Following a strenuous stretch of five trips in as many weeks, I can share with confidence that there's no place like home.

Don't get me wrong, these jaunts were all consistent with the greater good-including yesterday's two-step turnaround to sprinkle some Minyan Magic on the Midwest-but I've missed the 'Ville and the attendant thrill.

As I touched down in the wee hours of this Freaky Friday (not to mention some incessant preparation for a 9:30 AM conference call), I'm gonna invoke my literary license and share some far as I flows through my fingertips.

  • The story of the day yesterday was that Bank America (BAC) CEO Ken Lewis had his arm twisted by Hank Paulson to swallow his tongue alongside Merrill Lynch. Are you really that surprised?

  • What would the reaction be when we learn that a similar, albeit perhaps not as overt, nudge took place when they swallowed CountryWide Financial?

  • We've been talking about moral hazard for years and this is yet another example of how it continues to percolate.

  • THE question-which is also something we've had on our radar-is one of the credibility of government officials, faith in the system and psychology surrounding the capital market construct.

  • Social mood... and risk appetites. We'll keep saying it because it's really that important.

  • As discussed earlier this week, my sense is that when the dust settles on 2009, the chart will feature Twin Bleaks. In other words, now that we've seen our first 20%+ plus rally of the year, I expect a stern downside test (perhaps towards the lows) before a second similar lift later this year.

  • The question, quite naturally, is whether the S&P needs to qualify the breakout above S&P 875 before this potential script plays out. My gut is that it doesn't but I most certainly respect that if it does, the "other side" of our ride could include a measured move towards S&P 975.

  • The Morgan Stanley (MS) CFO actually said that if you take out the write-offs, the quarter really wasn't that bad. That's like me saying if I took out pizza and chocolate, I'd be in pretty good shape. I mean seriously, isn't honesty, trust and respect the only sustainable construct that will put us back on a profitable path?

  • Minyan Kyle asks me why I trade FAS and FAZ financial crack and the honest answer is because crack is addictive. The more professional response is that my exposure in those vehicles is with very short-term horizons and I try not to carry them on my books for more than a few days at a clip.

  • Still, while we're talking about the Ten Crack Commandments, I'll note that two set-ups remain in play. The first is the upside gap in the FAS ($8.25 to $9.75) and the second is the FAZ $8.5 support level (numerous lows the last few weeks). See both sides, Minyans, while remembering that technical analysis is a better context than catalyst.

  • Minyan Ambassadors, my apologies on the lack of Minyanville Underground Railroad murmurs of late as we're tying up some major initiatives that have us burning the midnight candle. We remain committed to the cause and very much appreciate the patience.

Good luck today, friends. Let's stick the landing on the final fifth of this freaky week!


In memory of our fallen friend and trusted colleague, Bennet Sedacca, 100% of the donations made to the RP Foundation through April will be channeled to philanthropic endeavors consistent with the RP mission, working closely with the Sedacca clan in the distribution of those funds. We thank you kindly for your support as we strive to effect positive change in the lives of children.

No positions in stocks mentioned.

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

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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