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Freaky Friday Potpourri: Light the Fuse or Sell the News?


Earnings season will define the path to profitability.


"There is a road, no simple highway, between the dawn and the dark of night. And if you go no one may follow, that path is for your steps alone." --Ripple, Grateful Dead

I spoke at a philanthropic symposium Wednesday night for Canadian investors and thoroughly enjoyed the experience; I was somewhat surprised.

Why? After a strenuous stretch of juggles and struggles, the last thing I wanted to do was chew through my view of the markets. Given how much I love to debate the state of the tape, that pretty much tells you all you need to know about the gas in my tank.

When I arrived, I was told that the group spent the day with some of the biggest and brightest names in the hedge fund universe. I asked how I came to be part of such a stellar cast and was told they wanted to pick my brain. "Really?" I asked only half-joking, "They'll need a pair of tweezers and a magnifying glass!"

What followed was a spirited discussion about where we are, how we got here, and an exploration of the probability spectrum that awaits. We spoke about the role of the government, conventional wisdom, the technical construct, upcoming earnings and what we've learned (versus what we've done) in our derivative-laced, finance based global economy.

It was a robust dialog and, in a way, extremely cathartic.

When we broke for the evening, I anticipated granular discussions about what to do and when to do it. Interestingly, as I spoke to a few folks, I found the common thread had little to do with the markets and everything to do with how we, the people, can personally effect positive change in such a frictionous environment.

We all want to make bread while we bake bread and pave a profitable path; that's human nature and necessity, at least for the majority of us.

After almost 20 years of trading and ten years in media, however, I've picked up a subtle shift in the mainstream mindset. While many still look for the bigger better thing, there's a growing contingent of those determined to make a difference.

There was legitimate concern for world peace, worries about how decisions today will effect children of tomorrow and genuine interest in giving back rather than getting back. We often talk about how socioeconomic change will arrive in waves and this was one wave that was most welcomed to see.

When we talk about positive change through financial understanding, it's not about calling the tape or catching a cusp, although those are always nice. It's about improving the process, however gradually, and taking responsibilities for our actions, both individually and as the collective.

It's not only our right to make a difference; it's our responsibility. As Minyans, most of you likely already know this.

Random Thoughts:

  • A respite for Hoofy may be the most prosperous path as earnings approach. If he exhausts his energy running into next week, the likelihood that investors sell the news with furious vengeance increases in kind.

  • I can't help wonder if AIG (AIG) has emerged as a psychology proxy. It sure seems to be leading the tape in both directions of late.

  • Whatever happened to those billion dollar hedge funds that halted redemptions way back when? Could that be an unforeseen element of past or future price action? My gut says yes but it rarely pays to play invisible catalysts.

  • Remember in 2006 when I wrote State of the Art, discussing the future Wall Street business model? In it, we said:

    As research expenses can no longer be justified by investment banking revenue, an emerging trend of "outsourced information" should soon become industry standard. In time, a customer will have the ability to "opt-in" to a pool of commoditized research much the way they can currently craft a risk profile. This will ultimately benefit the investing public but has far-reaching implications for the financial complex.

  • Why do I bring that up? Because it's finally arrived in spades.

  • I know a few folks who are bearish but not many that are short.

  • S&P 1040-1070 remains the in-vogue range for technicians in our midst, although my back of the envelope calculations would extend support down to S&P 1025ish.

  • My grandfather Ruby taught me to think positive and never run scared. He was referencing life, not the markets, but the same lessons apply. That's sorta where "trade to win, never trade not to lose" came from, if we're giving credit where credits due.

  • We're always early in the 'Ville; we were pretty grizzly on the greenback from 2002 through the end of 2007 (DXY –40%) before championing "the return of the greenback" as one of our ten themes for 2008 (DXY +7%). I offer that as a context for my variant view -- one shared by Mr. Practical -- that we could see some strength before further debasing.

  • I got plugged on four Raiders tickets for Sunday's game against the Giants. The forecast is 62 and sunny, with gusts of silver, black and blue.

  • If the bovine relay race is the transference of risk from the government to corporate America to the consumer, we're in the midst of the first baton pass. That's what the credit markets are telling us and it's a valuable lens regardless of your directional bias.

  • Minyan Raoul from Mexico pinged to offer kind vibes on the completion of Memoirs and in front of Festivus (he's a mainstay at MV Events). He said, "I know you're running 300% (it shows)..." and he would be right. I won't complain (it beats the alternative) but will say that I look forward to some down time when it comes to pass.

  • It won't be next week, as we're taking the show on the road and hitting six cities in as many days (I'm lucky I work with my best pal; it makes the layovers a bit more bearable!). The Critter Express will complete this leg of our journey at Syracuse University on Friday for our version of a Town Hall Chat. Upstate Minyans are of course most welcome to attend.

Answers I Really Wanna Know...

  • Have you sniffed Paul Krugman, who recently offered an interesting take on World Trade through a historical lens?

  • Isn't that the same interview where he shares a variant view on protectionism, saying it was an effect -- not a cause -- of The Great Depression?

  • When's the last time you heard "whisper numbers?" into earnings?

  • Where are we in denial-migration-panic?

  • Is it possible that Paul McCartney is underrated?

  • Do old school Minyans remember how we discussed the "disconnect" in psychology between 2001, 2002 and 2003?

  • Where 10% returns got funds a gold star on the front-end of that curve and fired on the back end?

  • Can it be that I'm hearing the same sorta stories?

  • Fund managers that were up double-digit returns over the last few years are being scolded for not taking enough risk?

  • I will again ask, where are we on that denial-migration-panic continuum?

  • Am I the only one who feels like there's a massive compression upon us?

  • Not necessarily through the lens of the market, but on society as a whole?

  • How awesome would an old school Yankee-Dodger World Series be?


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