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Random Thoughts: Readying For the Hump Day Hike


Position wisely into the week's latter half.

  • In July, when crude was hovering around $140, we offered that it would likely trade to par ($100) into the election as part of a coordinated agenda. We also warned that, at a point, sentiment would shift from the decline being an implied "tax-break" to it being endemic of slowing global growth.

  • Minyanville has been all over that non-correlation--Professor Scott Reamer first spoke about this years ago--and we've consistently banged the drum (the ten year correlation between the two asset classes is -0.04). Old habits--or, in this case, conditioned belief patterns are hard to break, as evidenced by the pushback that continues to exist.

  • This morning, The Wall Street Journal, New York Times and Financial Times are all featuring front page spreads devoted to this precise dynamic--that precipitously lower crude is indeed problematic. I don't share this as a victory lap--that's never been our style in the 'Ville--but rather to again remind ye faithful to think about "why" rather than simply "what."

  • With that myth seemingly debunked, I will draw your attention to the next major misperception--that a stronger dollar will be equity positive. If that's the case, how does one explain the 40% peak to trough decline in the greenback since 2002 and the attendant ramp in assets classes as a whole?

  • We've spoken about this a lot as well and, sans acrimony, I'll offer that by the time it becomes front page news, Minyans will have once again been well warned.

  • On August 22nd, we picked up chatter that a $3 billion commodity based hedge fund was shuttering its doors. This morning, we found out exactly who it was.

  • After actively trading around smaller positions yesterday--buying dips, selling blips, hittin', quittin' and keeping lotsa powder dry--I enter today's fray long some USO calls (50% of my position vs. buying yesterday's opening), American Express (AXP) puts (a starter position consistent with our "phase" thesis), a snivlet of Morgan Stanley (MS) puts (bought when I saw Merrill Lynch (MER) flip the crimson switch), an odd-lot of Baidu (BIDU) puts and a pared Yahoo (YHOO) call position (sans a discernible catalyst).

  • Speaking of the phase thesis, we spoke last week about Retail Therapy or, in other words, how retailers might need a therapist come holiday season. Word on the street is that a rather large mutual fund company has been accumulating large stakes in the sector. I won't name names but I will say that I heard a similar story (about the same fund) five years ago when they were gobbling up Fannie Mae (FNM).

  • The "underneath puts" were bought during yesterday's morning rip higher in an attempt to initiate starter positions in front of what I perceive to be a critical month for the markets.

  • I'm not married to anything, so you know, and will trade 'em as I see 'em with an eye towards capital preservation. While I expect some downside, I respect the upside as a function of "unforeseen announcements" by the powers that be.

  • Don't hate the player, hate the game, right?

  • The doors to Festivus 2008 are officially open! Lock your spot for the critter trot as last year's soiree sold out. This is our annual event to commingle our professors, partners and Minyans while chowing down and listening to live music. The very best part? It's for the kids in the good name of my grandfather.

  • Good luck Minyans--let's hit this Hump hard!


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Positions in USO, MS, AXP, YHOO, BIDU

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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