Random Thoughts: The World According to Jack Bauer
As markets rested over the weekend, further fodder also emerged in the "Main Street vs. Wall Street" storyline.
"Oh baby, baby it's a wild world. It's hard to get by just upon a smile."
- Cat Stevens
I make no secret of my bromance with Jack Bauer; since we crossed paths years ago, I often ask myself "What would Jack do?" when faced with difficult decisions.
As he weaved his way through the wicked world last night, I had two thoughts. The first was, "How awesome would Jack be in the Ultimate Fighting Championship?" The second was, "Even Jack, as lucid and level-headed as he is, would have a tough time trading this tape."
Let's digest the world for a moment. As discussed last week, there is a disturbing precedent for the sovereign situations currently unfolding. Through the lens of the five stages of grieving-denial, anger, bargaining, sadness and acceptance-we've seen this movie before and can only hope President Taylor, along with other world leaders, can contain this latest crisis.
On Friday, news broke that Euro Zone finance ministers would not discuss specific ways of supporting Greece when they met, according to Reuters. "No. Very definitely not; it is too early," said a senior source with CTU-level clearance. I imagine Jack, upon hearing the news, rolled his eyes and said, "The lives of millions of innocent people are at stake! This is no time to be reactive; we need to get in front of this thing!"
In the 72 hours that followed, the curious news continued. Dubai World, the troubled state-controlled Middle East conglomerate, announced plans to repay its lenders a paltry 60 cents on every dollar owed, according the Wall Street Journal. This, of course, is only a few months after the world assumed that Abu Dhabi implicitly guaranteed these obligations. I understand Omar Hassan is going through a tough stretch but that's nuts!
As markets rested over the weekend, further fodder also emerged in the "Main Street vs. Wall Street" storyline. The latest twist is a percolating dispute over the role of financial institutions in the derivative swaps hidden deep within the balance sheet of Greece. The questions at hand aren't simply the multi-billion dollar transactions that took place years ago, but the accounting and transparency thereof; they were, in many cases, treated as a currency trades rather than loans.
And Greece wasn't alone, according to a recent article in the New York Times. Goldman Sachs (GS), JP Morgan Chase (JPM) and other banks created synthetic instruments that masked debts in a litany of European countries, including Italy.
Take a step back and think about this for a moment; not only is there massive counter-party risk for the world's largest financial institutions, there is now the specter-through the lens of "perception is reality" -- of fraud. Agree with it or not, it certainly won't help the social mood surrounding the capital market construct.
Bringing this discussion full circle, Greek Finance Minister George Papaconstantinou -- aka "Papa G" -- offered this morning that Greece is ahead of its own deficit-reduction targets and will NOT require any bailout from the European Union, according to Bloomberg.
That's his story and he's sticking to it but I, for one, would like to see if he changes his tune after an hour with Jack Bauer.
Renee Walker? I Don't Even Know 'er!
I often see things; it sounds weird, I know, but it proves true time and time again. While one might argue it's a gift, it can be quite costly if risk profiles and time horizons aren't properly synced. We touched on this last week with a few real-time examples, noting that the fine line between being early and being wrong is called profitability.
As Minyans know, I've been operating with a short bias this year, selling blips to buy dips, which is a subtle yet important stylistic distinction (read: trading from the short side). While that was "salmon to the stream" the first two weeks of 2010, it proved profitable since "The Crash Index" kicked in mid-January.
As discussed in real-time on the Buzz & Banter, I unwound my shorts in their entirety on the Friday before the Super Bowl. After a 13-session 100-handle decline, it was time to humbly cover my risk into that messy Friday abyss and turn my attention to the game. I've had my fair share of despair on the trading front but that trade was one for the good guys.
The following week, as the tape bounced back and worked off the oversold condition, I edged into fresh short exposure with an eye towards defined risk. The levels of lore, as discussed at the time and still in play, were S&P 1080 (the bottom of the Q4 trend channel and the "lower highs" of the last few weeks), S&P 1100-1120 and S&P 1150. I'm "leaning against" the tightest risk definition (and plan to pare risk should the S&P 1085 level breach) but my stylistic approach will remain constant as a function of time and price.
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Why would I reduce -- rather than add -- risk given my strong sense that something sinister lurks in the shadows of sovereign debt and Main Street fret? There are two sides to every trade and a picture says a thousand words, as demonstrated by the chart below. While Boo is quick to note layered resistance above -- and he's right -- Hoofy will draw your attention to the double-secret support that isn't currently on many radars.
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We live in a multi-linear world with an abundance of variables vying for our attention at any given time. With that in mind, please continue to keep an eye on the US Dollar. In addition to the four "higher lows," the greenback is about to register a "golden cross," with the 50-day crossing up through the 200-day. While Minyanville historically casts a wary eye on the relevance of such events, when viewed in isolation, it warrants a mention as we together find our way.
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Some Random Thoughts
- If sovereign default contagion is on the horizon, wouldn't some sorta CDS "over-haul" come down the pipe before such a scenario unfolds? Welcome to the short-side regulation risk, the 2010 edition; keep that right hand up.
- If you were out last week, this 'face for radio' taped two segments on the sovereign situations and the potential for market volatility. We covered alotta ground so I share this fare for those that care.
- The Simon Property Group (SPG) $10 billion offer to purchase General Growth Properties (GGWPQ) is on the margin bullish. The specter of M&A, largely better-than-expected earnings and the "other side" double-secret support mentioned above is the current bull case. See it, even if you don't agree with it.
- Syracuse dropped a "gimme" to Louisville over the weekend. I'm putting a positive spin on the loss for two reasons. First, it's a reality check for a squad that might have gotten ahead of itself. Second, Wes Johnson-our best player-has an injured thumb on his shooting hand. So long as it heals before March Madness begins, we should be in good shape.
- When's the last time you perused Minyanville's Ten Trading Commandments?
- In the "Lest you think times aren't tough" department, Utah has a plan that will "cut" 12th grade, Harrisburg is excluding debt payments from the 2010 budget, Colorado City, facing a budget gap, shut off lights are the latest in a series of austerity initiatives.
- A dear friend sent this to me and I shared it with ye faithful. If you haven't taken the time to watch it, I assure you it's worth a few minutes of your life. A little perspective goes a long way indeed.
- Minyanland, birthed a few years ago to teach children the building blocks of earning, spending, saving and giving, last week registered our 500,000th Mini-Minyan! We're gonna do something snazzy for the 1,000,000th kid and the wheels are spinning on what, exactly, that will be.
- Have a great four-session week, my friends; let's make it count
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