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Randoms: General Malaise

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A new chapter in American history is upon us.

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Editor's Note: The following was posted in real time on our premium Buzz & Banter (click for a free trial). It's being shared here for the benefit of the Minyanville community. See also What Does the Dollar Mean for Stocks?


General Malaise? - 9:55 am

There's been alotta insider selling at General Motors (GM) (-20%) as it preps for bankruptcy. We've warned of this "financial in drag" for many years and quite unfortunately, the saga seems to have come full circle.

My concerns--outside of the employees, their pensions and their families--center on three primary issues.

First, the treatment of the bondholders and the implications for the capital market construct. Second, the ripples through the supply chain. Third, outstanding counter-party risk in our derivative laced finance based economy, including the ramifications for credit default obligations.

All for one and one for all used to be a famous battle cry. Given our financial machination, that phrase could take on an entirely more profound meaning by the time we arrive at the other end of this prolonged process of price discovery.

Risk management over reward chasing remains my particular style of choice.


Muse and Views - 10:40 am

  • Speaking of Cali--no, not this--Governor Schwarzenegger said yesterday that should budget-related ballot measures fail next week, "Fire stations will close, prisons will be forced to release inmates, schools will lay off more than 50,000 teachers, schools will be shut down for several weeks, and the state will have to borrow from local governments."

  • Yikes! Don't shoot the messenger but "pension panic and puny munis" shouldn't come as a shock to ye faithful.

  • I sound pretty surly so I must be massively short, right? Nope--actually, into S&P 900, I covered my remaining shorts (in the S&P and financials) to take a fresh look.

  • Why? 1) I wanna watch how they respond to that level (nothing wrong with that), 2) defined risk is up near S&P 950 (hey, it's 6%) and 3) trades are made to be taken (I slapped on that exposure Friday and I'll never lament when humbly taking a profit).

  • The real test will be when the tape tests S&P 875, the level of lore from where we broke out.

  • Keep your eye on energy--if crude flips the downside switch, the drillers feel like they've got some room to swoon.

  • Again, so we're on the same page, my inclination is to "short blips to buy dips" (read: trade from the short side) which is markedly different from the "buy dips to sell blips" (trade from the long side) approach I employed in late February and early March.

  • Clapton!

  • Have I mentioned how excited I am to finally take a vacation (starting next Friday) and unplug from this wild world for a while? Work to live don't live to work, right?

  • As always, I hope this finds you with some jingle in your jeans and a smile on ye puss.


Turnaround Tuesday? - 1:21 pm

I'm not talking about the nonsensical (yet highly prescient) tendency for the market to reverse the prevalent trend during the second session each week, I'm talking about my personal perspective today, one that has me "turned around" to find a new to-do at each and every turn. Mama said there would be days like this but rather than lament or vent, I'm gonna let it roll off my shoulders like water off a duck's back. It could be worse, I know, and for many folks it already is.

Some top-line vibes as we edge towards the Hump:

  • As discussed in my previous Buzz, I covered my short-side exposure into S&P 900 with an eye towards "watching." It feels like premature evacuation--breadth is 2:1 negative, banks are taking it on the chin (BKX -7%) and tech is getting thumped--but I continue to trade with a scalpel rather than a sword.

  • Consistent with our discourse of late, I'm looking to "short to cover" rather than "buy to sell." It's a subtle yet important stylistic distinction as we together edge ahead.

  • Levels of lore include Smita's aforementioned QQQQ $33.70 level, DXY 83 (still below) and S&P 900 (should it break, it'll pave the way towards the retest of S&P 875). Sometimes the big picture is easier digested as a series of smaller ones.

  • The Office of Management and Budget issued a report yesterday offering that Fannie (FNM) and Freddie (FRE) could need $92 billion more bananas over and above the $78 billion they've received since we, the people, took them over in September.

  • I'm reworking The Declaration of Interdependence as my syndicated vibe tomorrow as I believe it's a pretty important topic. We don't "do" redundancy in the 'Ville but once in a while, we'll make an exception.

  • I'm reworking The Declaration of Interdependence as my syndicated vibe tomorrow as I believe it's a pretty important topic. We don't "do" redundancy in the 'Ville but once in a while, we'll make an exception.

  • It's a tough world out there. Please join me in sending some Minyan white light to the family of Carl.

  • Have I mentioned how jazzed I am about taking some time away from the bump and grind? I've long said the definition of professional nirvana is to do what you love with people you respect while serving the greater good. While the 'Ville is a labor of love, make no mistake that it's labor that requires an occasional reboot.

  • Deep breath, my friend, it's a marathon not a sprint. As always, I hope this finds you well.


R.P.

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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 todd@minyanville.com.

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