Jan

15

LeopardOne of the old time favorite market proverbs of the 20th Century was that the market abhors a vacuum like nature the plague. I thought of this as the market hit its fourth consecutive 20 day minimum in eight trading days, moving down to adjusted futures levels not seen since the end of September 2006, the bonds at their fifth 20 day high of the last 10 trading days, and the granddaddy of tech, Intel, announcing bad earnings and the stock dropping 15%, Citi dropping 7% on the day, taking on more foreign ownership, with the Nasdaq futures down 5% in one day, dropping 9% on the year, and S&P falling 50 points in a day, and 6% since Christmas, and the Dow going below the round number of 12500 at the close, a nine month low, settling at a too smart 12501.

I recently returned from the Naples Zoo where I saw the leopard exhibit. The leopard is considered by some to be the most intelligent animal, since it has learned the lesson that we all know from the crocodile never to visit the same site twice, never to use the same hunting pattern, and never to accept an easy kill because it might be poisoned. It kills in an instant, in the time that a hunter might stoop to pick up a dropped object, and did so while Corbett was attempting to kill it over a three month period, after it had killed well over a hundred. The story is told in the Man-Eating Leopard of Rudraprayag and the Man-Eater of Kumaon. Jim Corbett, in tracking the man-eater of Rudraprayag, camped first in a tower over a bridge for three weeks without the leopard's crossing below, and the day he left the leopard came in for a kill and then Corbett camped in a mango tree for 10 days before winning the battle of wits.

The leopard is a solitary animal and kills in one bite of the jugular, which it teaches its young to find. I believe there is much to learn from the leopard when a series of cathartic events leaves a vacuum to be filled and I will apply these lessons.


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6 Comments so far

  1. gabe on January 16, 2008 12:36 am

    The catharsis is not complete yet. This market is more efficient than I thought. Citi began the quarter with $55 billion in exposure to subprime and ended with $37 billion. In the quarter when the new honchos were supposed to throw the kitchen sink to pave their way to bonuses. What's worse is Crittenden is stressing that there is no market against which to mark these asset backed CDOs, eight months after it all started. So these writedowns are just mark-to-model, educated guesses. Today's call was very educational.

  2. vic on January 16, 2008 12:40 pm

    The point I tried to make is that the vacuum has been filled by all the cathartic events mentioned and that the abhorrence is over, and now the usual dipsy-doodle of down at the beginning of the year to get all the January barometer followers the wrong way, and then the big move up. That's the lesson I will be applying for better or worse. vic

  3. Glendon Jones on January 16, 2008 9:25 pm

    I agree with Vic, there is a vacuum that will be filled shortly and probably overnight, trapping many bears. The catalyst for this could well be a comment by Ben Bernanke that he will not let deflation (the clear and present danger) take hold, or something to that effect. Ben may not have the tools to stop deflation, and we may well drop into the abyss later this year, but his soothing words will ignite a multi-hundred point explosion in the blink of an eye, aided and abetted by short covering. Perhaps the catalyst will be a positive earnings report from Merrill Lynch Thursday morning (Jan 17, 2008).

  4. Tom on January 16, 2008 10:51 pm

    The monkeys at the Naples Zoo are absolutely adorable.

  5. James Miles on January 18, 2008 5:45 am

    The turbot and the pike also have a lot to teach us about hunting. Here's a great angler-cook on how they do it:

    "Turbot are highly successful predators who grow to be big, powerful fish. This is perhaps largely due to their economy of energy. They might actively hunt at the start and end of each tide run, but mostly they like to lie buried in the sand and wait until something dumb just happens to drift by on the tide. Like most flatfish, their chief weapons are stealth and camouflage."

    Now, the Pike:

    "Like most predators who hang around at the top of the food chain, pike are bone idle. They may be hunters, but they're thrifty with their fuel. The want to avoid the vicious circle of constant hunting to replace the calories they just burned in the last hunt. And so, with their tiger-like green and gold camouflage, they are lurk-and-pounce merchants. They hang out among weeds and underwater obstacles, waiting for lunch to practically deliver itself".

    Both quotes come from "Fish", by Hugh Fearnley-Whittinstall.

    I'll trade as little as possible today, watch, wait and think.

  6. steve leslie on January 18, 2008 4:29 pm

    the vacuum which you speak is a lack of liquidity. Banks reluctance to lend, a flight to bonds, a flight to quality, a perception that the Fed is unsure of itself, a fear of higher taxes, a slouching toward a recession, hedge fund implosions, ______ (fill in the blank).

    News is what the media decides is news.

    What will fill the void is the bigger question. molecules move to fill a space or void. a movement from high pressure to low pressure.

    Will foreign money move in for the kill. Will vultures move in to seize the dead or the dying. will one trillion in money markets look for a home, mutual funds that no longer face redemptions.

    All legitimate questions.

    The uninformed public is always late. late to sell and late to buy. That is their modus operandi.

    This will not be played out in days but rathers weeks and months.

    Much more to follow.

    sl.

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