The Stock Market: What Is and What Will Be

I got in the shower this morning after spending the better part of yesterday in bed (trying to shake what feels like the early innings of a stomach bug) and had an idea for a column titled: The Race Against the Clock. I have my best thoughts in the shower (not in an American Beauty sorta way) and that title seemed apropos given the upside feast before the next iteration of financial famine.

The genesis of the column, at least in the fleeting moment when it occupied my mind before the next A.D.D. thought raced through (where the heck is the conditioner?) was rooted in a litany of oft-stated aphorisms.

The purpose of the journey is the journey itself.

The destination we arrive at pales in comparison to the path we take to get there.

The reaction to news is more important than the news itself.

We were early in identifying the conditional elements of the first phase of the financial crisis, as well as the causal elements of the sovereign sequel last year.

And while we've aptly mapped both sides of government intervention, including the shifting social mood and the ramifications thereof, the inevitable comeuppance -- which in my view remains cumulative in nature -- looms large on the horizon.

Unfortunately, for my trading account as well as those who read me, I've been entirely too stringent with my risk appetite.

I'm not wont for excuses and I've long been my own harshest critic. In fact, that was the genesis of another Minyanville staple, 'Be good to others and better to yourself.' Still, it doesn't take feedback or emails or message boards to alert me that my market feel has been askew. Trading, if nothing else, offers tangible validation of how right you are at the end of every session, week, and year.

I should be thankful, I suppose, that over the last few months my trades, in size and frequency, have been a shadow of their former self as I've immersed myself in Minyan matters, philanthropic events, and a long-overdue book -- which has finally finished and listed for pre-order on Amazon.com.

But this forum, contrary to this particular swatch of content, has never been about me as much as it’s been about us. Yes, I take my name and word very seriously and feel the feel, for better or for worse. I very much want to see our community thrive and when possible, facilitate that with forward-looking thoughts..

Old school Minyans will recall my bull and bear costumes, when I would juggle the struggle during the days of the Internet craze and catch both trips on every whip. I'm not trading with the same frenetic pace as I did then, although I still view the tape through the same stair-step lens, which I dutifully communicate to the best of my ability. We've grown in size and scope since those heady days, and I trust what I read in these parts as much as what I write.

The Race Against the Clock indeed. We can point to the insolvency of the states, deteriorating world relations, pension tensions, untenable global debt, commercial real estate, widespread complacency, the exported middle class, joblessness, or the capacity in housing. But the market remains the ultimate arbiter of variant financial views.

The curveball that shaped our financial fortunes, while I suppose foreseeable, was historically unique and the size and scope of government intervention changed the "game," if we're still allowed to call it that. We once mused that the traditional assimilation of metrics no longer applied; that the current construct emerged as a giant game of chicken, with cumulative imbalances on one side and government agenda on the other. How true.

While I'll again remind Minyans that the equity market turned lower 25% before corporate credit showed strain preceding the last downside blast, that lens (not to be viewed in isolation) portends higher prices still -- perhaps for another year or so -- before the next bust arrives, which by all accounts could make the last malaise seem tame in comparison.

But don't take my word for it. Just as Minyanville doesn't want snaps when we're ahead of the curve, as we've been for almost a decade, we don't deserve the 'other side' when one of our opinions proves early or, as they're bound to be at times, wrong.

That mindset -- "tell me what to buy and when to sell" -- is precisely what got us into this mess in the first place and in the end, our job is to shed light, and not to master.

Random Thoughts

• The New York Times ran a front page story on Sunday about how off-board hedging allowed bankers -- particularly those at Goldman Sachs (GS) -- to skirt the financial regulation overhaul of pay practices.
  
  
• Earth to Matilda, we've been talking about these off-board collars in the 'Ville for a long time -- so this isn't what one would consider 'breaking news.' Off board collars have been all the rage since the mid-nineties; just ask Marc Cuban, who collared up his Yahoo! (YHOO) stock shortly after Broadcast.com was acquired near the height of the bubble prices.
  
  
• We spoke last week about the potential that Hoofy was using S&P 1300 as a baseline -- the longer he held that line, the more likely it became that the tape was basing, rather than churning.
  
  
• The banks stand out, and they've come to encapsulate our stair-step technical process. If you recall, BKX 50 was the level of lore for a mighty long time before the financials broke on through to the upside. More recently, BKX 52 was tested a few times (on the downside) -- but held -- paving the way to this latest trend channel, which is now being probed anew. As go the piggies, so goes the poke indeed.
  
  
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• With the VXO at 13 and the bear camp thinner than my 41-year old hair, we must remain on alert for the vaunted pop & drop (see both sides). That said, trailing stops will alleviate that angst (although they don't work overnight) and the mechanics of your swing will matter just as much as the results of your at-bat.
  
  
• While the AOL (AOL) purchase of HuffPo ($315 million) is of particular interest to these eyes, that marriage pales in comparison to Ensco's (ESV) $7.3 billion Pride (PDE) scoop, which will create the world's largest offshore driller, or Danaher (DHR) gobbling up Beekman Coulter (BEC) in a $6.8 billion transaction. Remember -- M&A, stock buybacks, and (soon to come) LBO’s are a direct result of the aforementioned corporate credit strength.
  
  
• With the book “content” in the rear-view, I’m looking forward to focusing more attention on the task -- and content -- at hand. Through that lens, I’ll see YOU on the Buzz & Banter, which is our real-time, play-by-play tale of the tape. There’s a gratis trial for newbies, so please take this in the manner intended -- which is a soft sell with huge upside!
  
  
• Good luck Minyans, and remember that profitability begins within.

R.P.

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