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Random Thoughts: Will a Rate Cut Be a Band-Aid on a Broken Bone?


It's a tale of two tapes (with 2:15 being the toggle) and the first move is typically the false move.

  • Have you seen the secret Federal Reserve Governor initiation test?

  • Forget being a highlight of the night. Watching my grandmother dance on stage with The Rolling Bones as a "woo woo" girl was one of the highlights of my life.

  • The two rules of thumb on FOMC days? It's a tale of two tapes (with 2:15 being the toggle) and the first move (after the announcement) is typically the false move.

  • Note the red beans in the financial seams as Washington Mutual (WM) hiccups 9%, UBS (UBS) slips 3% and the rest of their friends dance in Red Dye.

  • But wait, isn't the FOMC gonna cut rates today? I mean, at the very least, 25 bips on the Fed Funds and another quarter at the discount window?

  • Isn't that supposed to be good for the financials? Yeah, it is... but there is the possibility that these moves are Band-Aids on a broken bone. That is the risk for the blind belief crowd.

  • How can we know? Well, we can't. But we can define our exposure, which is prudent regardless of which side of the ride we're on. And if we're gonna do that, BKX 100-101 is as good a level as any.

  • As go the piggies, so goes the poke. So while all eyes are now cast towards fresh highs in the S&P, a mere 3% away, the non-confirmation in this complex is worthy of a nose scrunch.

  • Hey, we're just looking at the other side of the upside ride that was shared nine days and 800 DJIA points ago.

  • It's amazing how quickly collective sentiment shifts, eh?

  • I don't have a horse in the race yet--I'm watching, sneezing, coughing and wheezing--but my inclination, as it stands, is to fade (read: sell) the financials into strength in the context of defined risk.

  • This Minyan Op-Ed is spurring all sorts of responses in the 'Ville today.

  • Hey, what's $681 trillion dollars amongst friends?

  • Do you starve a fever and feed a cold or the other way around?

  • Moral hazard is the prospect that a party insulated from risk may behave differently than it would if it were fully exposed to the risk. For example, an insured party's behavior might be more risky than it would have been without the insurance. Moral hazard arises because an individual or institution does not bear the full consequences of its actions, and therefore has a tendency to act less carefully than it otherwise would, leaving another party to bear some responsibility for the consequences of those actions. (Wikipedia)

  • What is it about The Princess Bride that always seems invite smiles?

  • I punted my Pulte Homes (PHM) into the Pre-Festivus liftage (20% in a few sessions). Still, I'm watching O-Dog and the homies as a proxy of sub-prime bailout plan psychology.

  • I gotta give it up to the Minyanville community and those who supported the Ruby Peck Foundation. THAT is the purpose of the journey and it was a tremendous time to boot. Thank you, thank you and thank you.

  • Fare ye well into the dwell.


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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

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