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Freaky Thursday Potpourri: The Asset Class Dance


Truly an interesting time in finance.

Good morning and welcome to the final quarter of our weekly order. After some much needed sleep following yesterday's weep, we ready anew to sow what we reap.

This market is no joke, from manic rides to panic slides, as each session seemingly assumes a life of its own. One minute you're up half a million in soybeans and the next, boom, your kids don't go to college and they've repossessed your Bentley. Are you with me? Good. Let's get to work

This Bears Repeating, In More Ways Than One

Into the Monday end-of-the-world abyss, I got pretty bullish on the banks for the first time in a long time. I didn't expect these names to rally more than 25% in two days but that, dare I say, was the easy trade. With the oversold condition alleviated, socialist programs in vogue, lower highs in place, foreigners increasingly anxious and the wishbone stretching thin, current risk is decidedly two-sided.

I scribed vibe yesterday regarding the commodity carnage that is again worth highlighting. I want to be more constructive on the potential for a sustained rally (in the context of a bear market) but this remains the fly in the upside try. As such, I'll share it anew for those who might have missed it:

Of Flies and Tries

You know how they say that the sharpest rallies occur in the context of a bear market, with a conscious nod to the last two Turnaround Tuesdays? Commodity bulls are quick to offer that the most vicious sell-offs occur in the context of a bull market. And you know what? They would be right.


While the market continues to write the most interesting script in the history of finance, we would be wise to remember Our Wishbone World. We're standing at the crossroads of an incredibly important juncture, one that has implications for asset classes, the dollar, social mood, risk appetite and just about anything driven by supply or demand. That's why we must remain lucid at all times as we attempt to read the Street signs.

This, my friend, is the fly in the "that was the low" argument. With the dollar rallying for the second day in a row and commodities breaking down worse than I did last night, the potential exists that we've turned a dark corner. We spoke about the Phantom of the Market in the summer of 2006 but policies were put in place to ensure the devil we know (inflation) trumped the devil we don't.

There is no way to know if this is, in fact, deflation manifest. I would strongly urge you to read The Phantom Column, however, so you can allow for this scenario in your probability spectrum. Mr. Practical and I both believe that all roads lead that way. Having a road map in your back pocket is probably a good idea.

Random Thoughts
  • To look at this hook another way, be sure to read Pepe Depew's Five Things from yesterday. He remains the best read on the Street and this missive is particularly powerful.

  • A few Minyans responded my column yesterday by saying "This is been going in mainstream America for years-the difference is that now it's happening to your friends."

  • I concur, my friends. Minyanville has been talking about "haves and the have nots" and the destruction of the middle class since there was a middle class. We've been in that camp and on your side. That doesn't mean there aren't good "haves" and we should ignore their pain.

  • Last night on TV, Cody asked me what I liked for the next six months or so. I said "given the action in commodities-and particularly if the dollar rallies-I still feel that capital preservation is the proper mindset. What I spaced on saying-and what Minyans know-is that if I had to pick a few sectors, consumer non-durables and pharma would be my picks.

  • Last night, when I stepped away from my home computer to take a call, Phoebe got to my keyboard and shared some thoughts regarding the loss of her sister. In her words, "hdafp audf 2f78% adf2x." I know, pretty sweet, eh?

  • I covered half my Schlumberger (SLB) puts from Tuesday into yesterday's close and punted the balance into this morning's quick dip. We offered last week that the "easy" trade in crude was back to par ($100). Fate Accomli.

  • There are alotta things I wanna think about this weekend. The laughter of my niece and nephew, memories of the bird, NCAA hoops (shoot, I gotta fill out my brackets!). Market risk? Not in my top five, thank you.

  • If you wanna see real-time thought processes from the best in breed on the Street-professors who are very good at what they do and better at who they are-check out a free trial of the Buzz & Banter. I mean, honestly, it's a free trial-how's that for risk-reward?

  • For what it's worth and so it's said, I told my buddy from Bear, "There is no shot this deal goes through at $2." He-along with everyone else-said "It's done, it's over." I don't think it'll be that easy. Expect a long and litigated battle on this baby.

  • Don't forget to get your Minyan March Madness brackets (password: Minyans) in by 11:00 a.m. EST. The winners get alotta schwag and bragging rights and the non-winners have the right-but not the obligation-to help some kids and do the right thing. Nice and nicer.

  • Gotta hop, yo. I'll see you on the Buzz.



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