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Random Thoughts: What Happens if We Don't Rally On the Bailout?


Is capitulation waiting in the wings?


Editor's Note: The following was posted in real time on our premium Buzz & Banter. It's being shared here for the benefit of the Minyanville community. See also Conversation With Mr. Practical, Storm Clouds?, Engine Room, More Steam! and Animal House.

It's 106 miles to Chicago, we got a full tank of gas, half a pack of cigarettes, it's dark, and we're wearing sunglasses. - 1:09 pm

  • "What drama--this is better than Law & Order. Oh wait, scratch that." Minyan James.

  • You think I'm kidding about the Minyanville Schnitzel commemorative coins. Just you wait.

  • They can't stop us. They can only hope to contain us.

  • The scariest thought I've had today? No, not Terry Woo's weekend plans. It's a very simple question: What happens if the market doesn't rally when the bailout is announced?

  • The VXO is quietly at 40. We're still a ways away from previous pain fulcrums--and my nonsensical sense is that it'll trade to 70--but it's certainly a step in the right direction.

  • Drat. If only I listened to myself in 2005.

  • Why does the phrase "too smart to buy 'em but too scared to short 'em" keep poppin' into my crowded keppe.

  • If you're not part of the solution, you're part of the problem. I that sans acrimony, of course.

  • So, lemme see if I've got this straight. Starting Sunday, we begin a single 144-hour day until we're bleeding, sweaty and tired and then drag our tired butts home, face plant, try to balance (for one day at least) and then start "fresh" with completely different rules?

  • HIT IT!

What if we get all dressed up for a Matador City Party and nobody comes? - 2:41 pm

  • I'll tell ya, the more things change, the more they stay the same!

  • Expect to see this blueprint many more times as the fat drips from the bone.

  • Once we're lean and mean, Hoofy will be a fighting machine. We're likely early on that (shocker), but we'll put it out there much like we put it out the udder way.

  • So, I called a few mints to see about the Minyanville Schnitzel. Suffice to say that they're all very busy.

  • I'm watching the homies. Why? They were the first to catch the black lung, Pa, and as the credit cancer phases through the patient, we should always remain conscious of the point of origin.

  • Pulte Homes (PHM) is up 5%, Ryland (RYL) is up a deuce and Katie, er, KB Homes (KBH) is tagging along for the ride. Prolly nuttin' but worthy of a nose scrunch.

  • A Minyan asked me which banks emerge on the other side of this ride. Bank of America (BAC), JPMorgan (JPM) and Wells Fargo (WFC) seem to be circled.

  • You'll notice that Citigroup (C) isn't on that list and that might surprise some people.

  • It's worth noting that just because they survive, doesn't mean the stocks will rally (keeping the hyperinflation genie in a bottle for the time being. As Mr. Practical said this morning, there must be culpability for equity holders.

  • I'll tell ya, the fact that everyone--and I mean EVERYONE--thinks that the market will rally on the bailout scares the sprinkles out of me.

  • In fact, that sell-off, if it is to occur, could lead to the true capitulation before the hyper-inflating arrives.

  • It would certainly get the VXO to 70, wouldn't it?

  • Who knows--honestly, I'm trying to figure this out as we go along just like you--but there was a speckle of clarity and I wanted to grab it before it's gone.

  • The first step is capital preservation. The second step is to identify if that means capital conversion. The timing is the fluid thing.

  • I don't know about you but this Minyan is ready to exhale. I hope this finds you well and remaining mindful of things we might have once taken for granted. Human nature and all, but we can turn it into something positive. Just you watch.

Bell Buzz! - 3:32 pm

  • So... I guess the short selling evil doers weren't the root cause of the problem?

  • Understanding that I'm sometimes right, sometimes wrong but always honest, I can't shake the sense that we get a bailout package, folks rush to sell and the market fails.

  • That scenario, if it is to occur, would trigger widespread panic and plant the seeds for true, Scary Mary capitulation (VXO 70).

  • That would lead to one helluva good trading opportunity (yes, we still do that despite the best efforts of policy makers).

  • I'm not long, I'm not short, I'm all cash. I just hope that cash isn't trash by the time we chime anew.

  • DEEP breath please--while it's been a long week, the decisions you make in the next thirty minutes will shape the risk profile you awake with on Monday. Remember, the definition of an investment should never be a trade gone awry.

  • With that, I'm gonna stop typing, if only for a few minutes. Fare ye well into the bell and have a safe, mindful weekend. There's alotta societal acrimony out there so keep it real and remember--you're a Minyan for a reason.

  • May peace be with you.


For NY area Minyans that would like to attend this event, click on the image and send a request.

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