The Stages of Grief

From thestreet.com 11/24/08

I spend a good amount of the trading day talking to people from all walks of trading life. On Thursday I had a profound conversation with a guy I had never spoken to before. The conference call was the result of a heated conversation I was having with a money manager regarding Citigroup(C Quote - Cramer on C - Stock Picks). I was fuming about how the shorts were crushing the stock. It felt like it was Lehman, American International Group(AIG Quote - Cramer on AIG - Stock Picks), Fannie Mae(FNM Quote - Cramer on FNM - Stock Picks), and Freddie Mac (FRE Quote - Cramer on FRE - Stock Picks) all over again. It felt like the market was going to zero. I was really worked up. My friend interrupted me and suggested I hold on while he put another trader on the conference call. "Paul" (not his real name) also was worked up about how the markets were acting so irrationally. During our conversation, he uttered a thought in passing, "This feels almost like someone is dying." ....
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Central Banks Should Go Long

From thestreet.com 10/13/08
I have spent 12 hours a day and most weekends engulfed in thought and opinion surrounding this current financial crisis. I have listened to and interviewed economists, congressmen and congresswomen, senators, administrators, regulators and CEOs. There is only one conclusion I can come to. It is clear that nothing is clear ... to anyone . There has been enough finger-pointing to fill a century of political opinion. Banks blame lenders, lenders blame regulators, regulators blame politicians, and politicians, being the carnivores they are, blame each other.
It has gotten to the point where, if I am interviewing someone and he or she starts the interview with a line about how we got here, I stop them mid-thought and ask, "We all have our own ideas about how we got here, now... can you offer any help going forward?"....
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Treacherous Times

From thestreet.com 9/21/08

The upheaval in the financial markets in recent days has been treacherous. The 4% swings of multi-trillion dollar markets is both unprecedented and unsettling. But we have to take some solace in the fact that the indices ended this past week virtually unchanged, thanks to a lot of help from the Federal Reserve, the Treasury, the White House and even Congress.
You know all the numbers: the $700 billion Treasury wants to use to rescue our financial system by buying bad mortgage-related debt, the $85 billion loan to AIG, etc.
Of all the week's events, Tuesday morning stands out most in my mind......
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Stay Calm Amid the Chaos

From thestreet.com 9/21/08

The upheaval in the financial markets in recent days has been treacherous. The 4% swings of multi-trillion dollar markets is both unprecedented and unsettling. But we have to take some solace in the fact that the indices ended this past week virtually unchanged, thanks to a lot of help from the Federal Reserve, the Treasury, the White House and even Congress.

You know all the numbers: the $700 billion Treasury wants to use to rescue our financial system by buying bad mortgage-related debt, the $85 billion loan to AIG, etc.

Of all the week's events, Tuesday morning stands out most in my mind. With AIG(AIG Quote - Cramer on AIG - Stock Picks) on the verge, I called my friend and broker Bobby at UBS(UBS Quote - Cramer on UBS - Stock Picks). I asked him how UBS stood given the fact that over the last few days, one investment bank after the other had been targeted by aggressive short-sellers. He said his firm was in very good shape. My concern was that after the shorts were through with all the U.S. banks holding mortgage derivatives, they would turn to the international banks with similar exposure. I instructed Bobby to but the full value of my portfolio in Treasury bills. He said the rates were really low and I instructed him to do it anyway. I was worried that my 23 years of blood, sweat and many tears would get swallowed by short-sellers smelling blood. I have no issue with legal short selling; I just did not want my portfolio to be chum for their very successful campaign.

Turns out Hank Paulson saw the same thing I did and headed it off before the impending run on the banking system was able to take hold.
I applaud those actions and those only. I am a free market advocate and have a hard time justifying some recent Fed and Treasury actions, but the protection of our deposited money in the various money market funds was brilliant. It differentiates the Wall Street risk from Main Street fallout. I agree that most on Main Street could care less if Lehman bankers are out on the street looking for work. I agree with them: That's the nature of risk and working for a company dealing in risk as its business model.
But when Mom and Pop on the corner of Main and Elm are worried about their cash deposited in the bank, we come face to face with the possibility of a a run on the banking system. We all lose in a run on the bank. Wall Street freezes and Main Street panics. The scary thing is that the panic would be justified as no one knows what ends a run on the modern bank. I certainly don't and haven't heard anything out of the government regulators and lawmakers that addresses a run on the banking system. So I bought 3-month T-bills for almost no yield. 80 basis points! I did not care that I would be getting three times that amount in normal times. Last week was not normal. I have no gut feeling what the next few months will bring. As my pal Dennis Gartman would say, if you put a gun to my head to guess what is next, I would choose "just pull the trigger" option. Its the safest!
My bottom line here is to keep calm, be nimble and this is not the time to take risks that haven't been fully vetted. I have reduced my exposure across the board, moved cash into T-bills and am waiting for a more clear sign of stability before putting more money to work.
As an update, I am long Goldman Sachs(GS Quote - Cramer on GS - Stock Picks), Toll Brothers(TOL Quote - Cramer on TOL - Stock Picks), Hovnanian(HOV Quote - Cramer on HOV - Stock Picks), CME(CME Quote - Cramer on CME - Stock Picks), the dollar index, gold, Exxon Mobil(XOM Quote - Cramer on XOM - Stock Picks), Devon Energy(DVN Quote - Cramer on DVN - Stock Picks), Chesapeake Energy(CHK Quote - Cramer on CHK - Stock Picks) and Chevron(CVX Quote - Cramer on CVX - Stock Picks). I am also looking for an entry point into natural gas futures. I haven't added new positions and am playing very close to the vest right now.
This means more now than any other time I have written it:Trade with your head and not over it!

Nothing Lucky About Rally

From thestreet.com 8/11/08

Eight seems to be the magic number.
In Chinese numerology, recurring numbers represent luck, and 8/8/08 was thought to be the luckiest day. Three eights were the perfect day to launch the Olympics. However, that day the luck was flowing here in our equity markets rather than in Beijing where the numerologists reside.
Think about this for a minute. If someone told you that there was a brand new conflict between Russia, a big oil producer with 200 million residents, and its small (population 4.5 million) border neighbor Georgia, and if you heard that Russian tanks were rolling and casualties were mounting, what would you guess the reaction would be in the oil market? Up $5? $10?

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