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Random Thoughts: Banking on Turnaround Tuesday


Scribes and vibes as the tape trickles lower.

Yesterday afternoon, on our real-time Buzz & Banter, we offered,

With the S&P tickling 1250-and everyone and their sister watching that level-keep half an eye on BKX 40, which is being probed right here, right now. IF the bears are gonna put up a fight into Turnaround Tuesday, this would be an intuitive level to edge out of their caves.

Sure enough and right on cue, Turnaround Tuesday arrived with a gust of crimson as the financials-Goldman (GS), JPMorgan (JPM), Barclays (BCS), Bank America (BAC)- kissed the BKX 40 level and retreated in kind. After all these years-and there's been a lot of them- I don't know if traders follow technical analysis because it works or if it works because folks watch it. Either way, it's pretty trippy.

The dollar is marginally higher today-a tell in itself-breadth is a lopsided 5:1 negative, and Europe took a breather as well. The bulls will offer that this is healthy and constructive action-working off some of the overbought condition into a big catalyst (Europe) tomorrow-while the bears will quietly smile as they suggest, "Yeah, that's exactly what we want you to think."

For my part, I've suggested to those close to me that they lighten longer-duration fixed income risk (in recent weeks, as discussed) and pare equity exposure into S&P 1250. The thought-which may be right or wrong and is yet to be determined-is to let Europe show itself and worst case-WORST case-the greatest cost will be that of opportunity (we can always reinitiate risk at a later time).

I'm not a financial advisor-I don't even play one on TV, although I'll be co-hosting Bloomberg Rewind Thursday night-so this vibe isn't for everyone, as we each have unique time horizons and risk profiles. But it is, if nothing else, honest. These are some tricky times, and there's no shame in admitting it's hard, there's only shame in pretending it's not.

Random Thoughts:
  • Sizable market hedges (November and December paper) were unwound yesterday (which might help explain why the VXO was down 10%).
  • Angela Merkel has a pretty packed Wednesday, eh?
  • Will the NCAA, as an institution, be around in five years? Smart money is telling me "no shot."
  • IBM (IBM) raised its share buyback this morning by $7 billion (remember when that was a lot of money?). Remember, firm credit markets manifest in three ways: stock buybacks, M&A and LBOs, so respect that even if you don't agree with it.
  • I'm reading Boomerang, which isn't Michael Lewis' best book but it's most certainly a compelling read on the sovereign debt crisis-very timely-and last night, I saw Margin Call, which is one of the better Wall Street movies I've seen in some time. In terms of "we need to go through it to get through it," these types of media plays suggest that we're in fact going through it now.
  • As always, I hope this finds you well.

Twitter: @todd_harrison

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