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Random Thoughts: Banks Break to Multi-Year Lows


Will the BKX breach the 75 level?

  • Greetings after an eight-day, three-city sojourn through Phoenix, Seattle and the City of Sin. With the benefit of hindsight, I shoulda reversed the itinerary but we live, learn and heck, you always double down when you've got an eleven and the dealer is showing a six, right?

  • One of the great misconceptions in today's marketplace is that a crude pullback will jack stocks. Could happen-at least initially-but I, for one, am wary of this conventional wisdom.

  • Note the bounce in crude as we edge through the Monday muck. I've been "trading around" my short thesis as a function of price (decline) and time (legging out of June paper and edging into out-months into rallies).

  • Remember two weeks ago during my initial energy equity enema, we spoke about textbook trading would position against a lower high (rather than standing in the way of a parabolic frolic). We've now got defined risk (previous high) with which to press short energy bets for those with such inclinations.

  • I'm a Mog. Half man, half dog. I'm my own best friend!

  • I've heard a few folks talk about how banks would be healthy if it wasn't for the loan losses. Dude, that's like saying the Knicks would be good if it wasn't for their players. The massive credit issuance and debt dependency is the root of our economic malaise, one that took a long time to form and will take equally long to unwind.

  • The three biggest risks to the market, in my most humble view? A sustained rally in the greenback, sharply lower commodities and a breach of BKX 75.

  • Does this mean I have to hire a lawyer? I mean, I've got critters all over this place!

  • I'll be attending (speaking at) the 1st annual MarketWatch confab, which is an all-day shindig on Wednesday. I'm still not used to being away from the screens during market hours but they've been good to me through the years and Ruby always taught me that one hand washes the other.

  • There's talk on the Street of the second phase of the credit crunch coming to pass. Minyans shouldn't be shocked by this-we've been talking about the other side of zero percent financing as one of this year's ten main themes.

  • The blame brush we spoke of in October continues to leave a litany of bodies in it's wake. I'm not saying Wachovia's Ken Thompson shouldn't bear the brunt of the hunt for his poor stock price performance. The buck stops at the desk of the CEO, as I know all too well, and his "ill timed" purchase of Golden West Financial was clearly a gaffe (as the Bank America (BAC) purchase of MBNA will prove to be).

  • The lead story in today's Wall Street Journal? "Americans are resorting to often-risky ways of shoring up cash as banks tighten lending standards, jobs dwindle, home prices fall and food and energy prices continue to climb."

  • While news is often "baked in" by the time it hits the front page, I share this fare with one thought in mind. While everyone is focused on inflation, the Phantom of Deflation continues to lurk as a massive behind-the-scenes risk (unless, of course, you own a home, in which case it's front and center!).

  • Did I mention that the banks are now trading at levels last seen in 2003?

  • Lakers-Celtics baby! We mused on this classic redeux at the beginning of the season (as opposed, say, to tossing a few shekels on it) and it promises to be one for the ages. I typically short Boston but it's hard not to like KG & Crew (and I've always had a warm spot in my heart for "Run LA!"). Should be a great series.

  • Ah, it's nice to be back... do you believe me? Yeah, reality bites, I know, but it's all good. I've always said that the definition of professional nirvana is to do what you love with people you respect while serving the greater good. Not a day passes when I don't feel sincere gratitude for being a part of the Minyan community. Thank you for that!


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