Randoms: Buy the Rumor and Sell the Fumes?
Turnaround Tuesday arrives on cue.
Geez, it seems so obvious with the benefit of hindsight.
As I weigh the fray and what to say, I continue to banter with my brethren on where we are and what it means. Professor Metro hit me on IM and asked if his Buzz yesterday aptly captured the current context of the market. I responded that "Yep, but I wonder if it's as easy as buying the rumor and selling the fumes?"
Once upon a time, conditioned complacency was so rampant that the VIX hugged the ten-handle for years. I'm not talking about the dreaded 70's, mind you-this was a few years ago!
I pull this chart to prove a point; while the mainstream media points to the muddled volatility as a proof point of compressed pressure, the tape continued to grind higher until the wheels finally fell off the wagon. It didn't matter until it did; and when it did, it mattered a lot.
Click to enlarge
That's not to say history repeats; if we've learned anything during the financial crisis, it's that historical precedent need not apply. The same imbalances that caused the crisis are cumulative in nature and ever-present underneath our feet. The saving grace, at least for the time being, is that corporate credit continues to suggest the collective comeuppance is a ways away.
With that said and respected, I would humbly offer that the next ten percent is to the downside. I'm not betting the farm -- it's one thing to have a view and another to be held hostage by it -- but my smallish S&P position, with positive gamma, is skewed to that side.
As always, I hope this finds you jinglin'.
- This is a fantastic option tutorial if you haven't already perused it.
- For those asking about that "thought provoking" article yesterday, here's a fresh link.
- Market breadth was 3:1 negative out of the gate and didn't improve by 10:00 AM (when trading tells officially "count"). Sometimes you can learn a lot just by watching.
- Here's a sneak peek at the Financial Crisis Inquiry Commission.
- Green beans in the Red Sea? American Express (AXP), IBM (IBM), Dell Computer (DELL), pharma and the consumer non-durables. WalMart (WMT) and Sears Holdings (SHLD) also deserve an honorable mention.
- We continue to get great feedback on our newly launched Grail ETF & Equity Investor newsletter, so if you're interested in ETFs or already trade them, take a free trial on us. Snaps to Ron & Denny for their hard work.
- How many Old School Minyans remember the rhyming phase of 2004 and 2005?
- Who was it that said that the next crisis would be one of confidence?
- These prices are INSANE! MV Tee's are ten bucks on Main Street. Pick a critter and sport it proud!
- Professor Jon Markman sent me a copy of his annotated edition of Edwin Lefère's Reminiscences of a Stock Operator and I'll tell ya, it rocks.
- Pickles are under appreciated. I mean, when is the last time you had a pickle in your home when it wasn't a garnish.
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at firstname.lastname@example.org.
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