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Random Thoughts: Waiting to Exhale


The bears bum-rush matador city.

Yesterday afternoon, I had a discussion with Michael "Blue Steel Jr." Sedacca about the current state of our financial fate, as we do each and every day, and I told him that my sense was that we're approaching a major reversal and/or gut check-and yes, I realize I'm likely a bit early.

Here's the twist-while I wanted to buy index puts into yesterday's close, I didn't pull the trigger as the price action was too pristine and our S&P price target remains 3% away. Still, between the VXO meandering in the mid-teens and the frenzy over the Facebook IPO, it feels like we're getting close to a tradable cusp.

As shared on the Buzz & Banter, I've operated from the long side thus far this year (some of the stocks I've trafficked in are too thin to discuss in real-time) but flattened my trading pad heading into yesterday's close. While my posture is balanced and two-sided, the capitulation of the bear camp is worthy of a nose-scrunch; this is seemingly the mirror image of the December 2011 fret, when the smartest guys in the room screamed "Get Out of the Market!"

Please position yourself accordingly; step by step, we'll find our way.

Random Thoughts:
  • There were two sovereign debt auctions this morning and both were better than expected. Spain sold $6 billion in 3- to 5-year bonds at yields that were lower than earlier last month, however the demand was lower. France's auction of 6- to 10-year bonds had lower yields than last month and a higher demand. On Portugal watch, their bonds and CDS are both improving this morning.
  • Two European leaders made announcements this morning detailing the Greek debt deal. European Commission Chief Ollie Rehn noted that talks were "very far along" and should wrap up in the coming days. Head Finance Minister Juncker had a slightly different angle, saying that efforts to contain the EU debt crisis have been "largely insufficient" and that the talks were "ultra-difficult."
  • I'm quickly learning the difference between being asked to do something and being asked to do something. It's a small price to pay for happiness but interesting on the margin.
  • Deutsche Bank (DB) painted the tape this morning with its earnings and outlook; watch this stock as a European financial proxy, along with the stateside trading tells (Bank of America (BAC), Goldman Sachs (GS) and Mother Morgan (MS), which is trying to put the teenage wasteland behind her on the heels of a very nice Facebook IPO win.
  • Fitch Ratings said yesterday that Portugal isn't a significant default risk to the eurozone. I would offer that the ratings agencies are a significant risk to those who manage risk.
  • Credit has always been a great precursor to stock price action -- it was one of the primary reasons why we sounded the alarm in August 2008 -- but we would be wise to remember that equities, as a leading indicator, always turn first. Indeed, even in front of the first phase of the financial crisis, stocks got hit for 25% before credit got burned.
  • This is your friendly Minyanville reminder that the S&P is up 24% since the October 2011 lows. If you're just now starting to get bullish -- particularly if you were bearish back then -- please check yourself before you wreck yourself (so to speak).
  • I've been watching Research in Motion (RIMM) but have yet to pull the trigger. My game plan is to scale back into some exposure when the tape pulls back (as I sense it will).
  • The Other Side of Wall Street has been nominated for a Small Business Book Award. If you dug the book, please take a moment to vote -- and thanks!
  • Do Something Joel; random acts of kindness are increasingly rare and by extension, increasingly valuable.
  • Isn't everything we've witnessed, including but not limited to the closing of brokerage firms, a function of The War on Capitalism?
  • Lemme hop over to the Buzz; as always, I hope this finds you well!

Twitter: @todd_harrison

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