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Random Thoughts: The Greek System!


Brothers and sisters watch each other's back.

Something about headlines always gives me a nose-scrunch. Perhaps, in the wise words of our fallen friend Bennet Sedacca, "What the market knows ain't worth knowing."

There's a fine line between being early and being wrong, of course; it's called profitability.

Was I wrong to own size Fannie Mae (FNM) $70-line puts in my personal account for years, rolling them month after month as I waited for the mortgage giant to implode? Yes, I finally tossed it on my restricted list just weeks before it cascaded lower (lesson learned: always sync your time horizon with your risk profile).

Were we wrong to call out the world's largest financial institutions -- including Citigroup (C), Goldman (GS), Morgan Stanley (MS), Bear Stearns, and Merrill Lynch (BAC) -- as they traded at all-time highs?

Or, for that matter, proactively predicting that we would soon enter a "prolonged period of socioeconomic malaise entirely more depressing than a recession" in the summer of 2006?

Nope; I moved my long-term bucket to 100% cash and quite hopefully, helped Minyans avoid the meat of the financial crisis heat in the process.

Was I wrong to be cautious in the back half of 2009? Yes, as price is the ultimate arbiter of variant views, and not necessarily, as opportunities are made up easier than losses. I'm not post-rationalizing; I'm simply saying that we each operate in a manner consistent with our individual time horizon and risk profiles.

This stroll down memory lane has a purpose; with Greece in the headlines day after day, one must wonder if our aforementioned contagion catalyst has become too obvious?

Perhaps Greece is Fannie Mae, Portugal is Freddie Mac (FRE), Spain is American International Group (AIG), Argentina is Wachovia and California is Lehman Brothers? Insane, you say? Not so fast, I'll counter; according to CMA Market Data, the land of the fruits and the nuts has a 25% probability of default.

My point? Contagion, by definition, comes in waves and phases. We saw Spain and Portugal infected last week and regardless of what IMF or EU "cross border solution" arrives, if it is to arrive, it'll only serve to buy time, much like Hank's Hail Mary in September 2008 pushed risk further out on the time continuum.

That doesn't mean we make blind bets and hope for the bears (see the Fannie Mae example above). I continue to use technical analysis as a risk context, not an absolute catalyst, as I hit and quit my way to better days and easier trades. As it stands, the other side of S&P 1085ish (drawn with a crayon) will serve that purpose, which doesn't preclude me from trading around the bias "in between."

Random Thoughts:

  • While my "gut" was that Snapper and the Bulls (not to be confused with Bennie and the Jets) could challenge S&P 1080ish, at a minimum, setting stops removes emotion. That's why I nibbled on a partial "long gamma, short delta" position into yesterday's strength, as discussed in real time on the Buzz & Banter.

  • It Could Work? Perhaps, Igor (its EE-Gore!). Take a look at the S&P downtrend from the recent highs, which intersect with the bottom of the Q4 trend channel. Short side stops can be set on the other side of that ride. I'm using this as near-term defined risk; now, will someone please put the candle back?

    Click to enlarge

  • The Tricky Trifecta? Note the last paragraph from Saturday's NYT article on Greek Debt and the Euro. "It is not the workers that should be blamed for this; it is bankers and large capital," Mr. Vavougios said. "We will take to the streets."

  • I can't believe I skipped Hoofy and Boo's west coast casting call; it would have been great to give them moral support during the critter auditions!

  • The definition of a Minyan is someone good at what they do but better at who they are. Consistent with that, please join me in welcoming Professor Howard Simons to the Minyanville community.

  • This old man won six straight games of hoops Saturday morning, which of course required me to play six full court games. I'll tell ya, I never knew how out of shape I was until I started to exercise!

  • Thank you Minyan Kirk for pointing out how historically important the Goldman Sachs $150 level is!

  • Congrats to Minyanland, as our 500,000th Mini-Minyan registered this weekend for our ongoing effort to teach kids the fundamental building blocks of earning, spending, saving and giving. If you've got a tyke at home, point them in that direction (it's free!).

  • And you wonder why California is effectively insolvent?

  • Does anyone else think of this every time they hear the words "John Thain?"

  • Do YOU multi-task?

  • There's another 20 inches heading to Washington DC area?

  • Are those Jewish inches?

  • Is THIS the February 11th news coming out of Iran?

  • How would one explain Minyanville in three minutes or less?

  • Who hit it harder -- Going Back to Cali or Going (Going) Back (Back) to Cali (Cali)?

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