Tuesday Morning Quarterback: Gimme A Break!
The destination we arrive at pales in comparison to the path we take to get there.
"I expected the Rocky Mountains to be a little rockier than this."
-- Harry Dunne
It was perfectly planned, a summer sojourn to end the season and recharge my batteries for the home stretch of 2009. Colorado is astounding this time of year, a multitude of colors mixing in the mountains as a cool breeze masks the sunshine 10,000 feet above sea level.
The particulars of the journey were carefully chosen. Mountain biking the first few days, overnight camping with a box of wine and a handful of S'Mores, Red Rocks with Crosby, Stills & Nash, a hike to Crested Butte (home of our inaugural Minyans in the Mountains) and some quality vibe time in Aspen with the Brotherhood of Allmans & Doobies.
The travel was seamless enough, as traveling goes. A 6:00 AM flight last Saturday morning ensured we sported Oakland Raider gear though the Denver airport on our way to the quiet mountain solitude. I enjoyed the looks of disgust from the hometown fans as there's no love lost between the Raider Nation and the dreaded Donkeys; it's a rivalry that makes the Yankees and Red Sox look like high school sweethearts.
Upon arrival, Minyan Dough Boy -- head coach of the Aspen Valley Ski Club, mountain biking extraordinaire and average air hockey player at best -- suggested we take a quick spin to warm up our legs and acclimate ourselves to the altitude. Fair enough, I thought, it was a nice and easy way to edge into a respite that was a long time coming.
Eight minutes -- 480 seconds -- into the ride, my girlfriend, a stellar athlete who once competed internationally in gymnastics, catapulted herself over the handlebars as she navigated the first turn and a trio of bikers approached from the other direction. I trailed closely as she completed a full somersault with a half-twist, landing in the nearby brush. I could swear a Russian judge somewhere in the distance held up a "9.7".
First and foremost, she'll be good as new following a few surgeries to repair a cracked collarbone and torn ligaments. We smile about it now-how clumsy it seemed, how tough she was to get back on the bike, how the great outdoors morphed into the first two seasons of Mad Men and ordering every conceivable take-out in NYC-but the bottom line is that it could have been worse, we're extremely lucky and very thankful.
The swatch of weeds she landed on was one of the few stretches that weren't littered with jagged rocks and prickly thick. I only wish I shouldered the load.
Robert Burns once said the best-laid plans of mice and men often go awry. And so it goes, as we edge into the final trimester of 2009, it's time to make a fresh set of plans and hope that this time, we collectively stick the landing.
Of Bulls and Bears
As my girlie slept off her pain meds late Friday, I scribed some vibe for ye faithful strapped to the their turret into the holiday stretch. As the tock ticked and stocks skipped, I offered the following thoughts on the Buzz & Banter as the week wound down:
I mentioned before I left for vacation that I weighed keeping some downside bets on my sheets. I did in fact hold 25% of my short-side exposure through last weekend and covered it in it's entirely into Tuesday's dismal close. I didn't make as much as I would have (if I didn't lighten my load) but it was more than I could have (if I flattened completely, as I considered doing and what true discipline would have dictated).
This morning in the waiting room at the hospital for special surgery, I turned to my girlfriend's father on the heels of the unemployment report (when the futures were flat) and mused "They'll rally 'em today." When he inquired why, I responded "If they can't take 'em down, they'll likely run 'em up, particularly given the thin holiday ranks." True to form, the market jumped as I tended to the walking wounded and occasionally checked my Blackberry.
As she snoozed in the afternoon, I edged to my home office and nibbled anew on some Powershares (QQQQ) puts-we're still in our 5-year 50% retracement congestion zone-and took a good look at some S&P puts. I'm not going hog wild-bulls and bears make money, pigs get slaughtered-but I want to dip a toe and set the table for Tuesday morning when the big boys return from the beach.
Fast-forward to this morning and the world is awash in optimism. Merger Monday is all the rage as a semi-sweet Ménage à trois unites the continents. Say what you will about Cadbury PLC's (CBY) rejection of Kraft Food's (KFT) $16.73 billion offer and conjecture that Hershey (HSY) will unwrap a kiss of it's own but M&A is a healthy element for a capital construct once stymied under the weight of worry.
Add last week's deal between Disney (DIS) and Marvel (MVL) -- which bodes well for animated critters of all shapes and sizes -- and you have an additional element of optimism that warrants attention while weighing both sides of the year-end ride.
Time Horizon and Risk Profile
Through my lens, two scenarios exist in the near-term and both have implications in an environment where performance anxiety is palpable into year-end.
The first is that we're quite close to a cycle high that will be contained by intersecting trend-lines in the NASDAQ coinciding with a 50% retracement of the entire slide in technology from the 2007 top. That chart, drawn with a crayon, is hanging on by a thread and I'll be watching the action closely into tomorrow, the 09/09/09 date Professor Cooper has had circled.
The second option is that upside inertia takes the tape to S&P 1120, which is its downtrend from the 2007 top and a precise 50% retracement in it's own right. That's a 10% move from current levels for those keeping score at home, and a viable option as we see both sides and manage risk accordingly.
One Way or Another is a great Blondie song but offers little in the way of financial insight. What I can say with a high degree of confidence is that this rally is cyclical rather than secular. In other words, if our government bought the cancer and sold the car crash, it's an intuitive assumption that the cancer victim won't hop off the operating table and immediately run a marathon.
Circling back to the waiting room at the Hospital for Special Surgery, I was asked how much longer "this" could last. My response -- consistent with what I've written on Minyanville -- is that, "the new bull in credit" aside, "it" could manifest in many ways, as it has since the tech bubble burst, triggering a stealth recession masked by the lower dollar and skewed by the spending habits of a slimming margin of society.
Remember when recession was considered anathema and the business cycle "stepped aside" to make way for the new paradigm? Energy isn't created or destroyed, it simply changes form and we would do well to remember it's never wise to mess with Mother Nature, particularly when our financial fate may no longer be in the hands of our policy makers.
Water pistol to head and operating under the assumption that "this" started at the turn of the century, I would venture to guess we're half way there. That doesn't mean there won't be monstrous rallies and massive opportunities along the way (as 2009 has aptly demonstrated) but in terms of the BIG picture, my humble view is that we're 5-7 years away from truly fertile fields where those who exercise financial staying power will be in a position to scoop dollars for dimes.
That doesn't make it right but on my name and word, it makes it honest.
A quick note to the corporate boards of each of those chocolate companies: If you would like an adviser who is willing to be paid in kind, please contact me directly.
Snaps to everyone at MVHQ and the entire Minyan community at large for winning the First Amendment Award for Outstanding Journalism: Best Financial Media Outlet. That'll look quite nice sitting next to Hoofy & Boo's Emmy Award.
We did make it to Red Rocks before the bumpy ride home and for those interested, this was the splendid set-list from the CSN show.
It's nonsensical but true: fund managers would prefer to lose money on an absolute basis rather than relatively under-perform. Keep that in mind as we edge towards year-end.
Markets are no longer natural; they're managed. The question thus becomes, if it's in the best interest of the collective, will it be allowed to continue? And if that's the case, can it still be called free-market capitalism?
So, lemme get this straight--banks either have to raise another $300 billion in capital or drop $5 trillion in assets?
A lower dollar is a necessary precursor to -- but no guarantor -- of higher asset class prices. With that in mind, please keep an eye on the greenback as it again probes critical support.
Gotta get this puppy out before thy opening bell tolls. It's good to be home, Minyans, let's get this party started right.
Daily Recap Newsletter