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Where The Market Will Go

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The answer is a matter of time.

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I'm reminded of the late great Bennet Sedacca's favorite chart, the graphical representation of denial, migration and panic.

As I snuck a peek at that psychological continuum, I wondered where we are on the curve. The answer, I suppose, is a function of time; as with most things, there are short-, medium- and longer-term horizons. The trick to the trade-this, or any-is making sure your risk profile and time horizons are in sync.

Short-term, after covering my recent spate of downside bets, I took a very defined upside stab Wednesday afternoon as we sat across multiple technical support zones. Those are pure trades in my eyes, and an attempt to squirrel some acorns through a defined risk lens.

Medium-term, over the next several months, I'm concerned for the "asset class" side of our equation should the dollar act well, as I believe it will. I'm holding some UUP exposure as a variant view of the widespread pooh (97% bears), as well as for the "best house in a bad neighborhood" trade (the recent Buzz by Professor Bloudek is required reading for all Minyans).

Longer-term, as discussed through the years, my fear is that a cumulative comeuppance will come to bear. We, the people, bought the cancer when we sold the car crash and we're living, quite literally, on borrowed time. This is not a healthy market; if it were, there would be no need for the government IV drip.

That's a different conversation than "Can we rally?" Of course we can; the question is, at what cost and to whom?

Pepe Depew recently wrote
"debt deflation is a game of survival more than an investment opportunity, but even on the spectrum of survival there are shapes of acceptable risks."

I think that's spot on; at the end of the day, trading, life, love-you name it-is about measuring potential reward versus incremental risk. I'll borrow a page from December 2006 when I was asked what concerned me most. My response was that "The Dow is trading at all-time highs yet nobody feels like we're at all-time highs."

Fast-forward to a conversation I had with Pep yesterday, when I said, "You hit the nail on the head with regard to survival. I'm hearing horror stories daily; businesses closing, relationships ending, folks not able to make ends meet. If it's this bad now, after a 60% rally, can you imagine what it will feel like when the next wave of the crisis hits?"

I'm a humble man; I don't claim to know when, why or how things happen, but experience is a powerful weapon of preparedness. The financial crisis hasn't disappeared, it's simply changed shape and that will manifest in unforeseen ways.

Our mandate in Minyanville is "truth and trust;" that doesn't make the above scenarios "right," it simply means they come from an honest place. I remain of the view that Financial Staying Power is the first and foremost goal of any investor and those who find their way the other side of this prolonged process of price discovery will have generational opportunities.

Fare ye well, Minyans, and be thankful for every day. It should never take something bad to make us realize that we've got it good

R.P.



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