TAKE UNDERS

Just as expected the trading crowd is focused on Take Unders i.e. Bear Stearns...they used to be called Take Overs....they used to say what "premium over book value" now it's what is book....below book?

The key is to appreciate several things now:

1) Counter party risk is measured when you know who you are dealing with....like their solvency, liquidity, longevity, measurability and predictability. When this can't be approximated then phone calls are not returned, assets get withdrawn and rumors get spread. Avoid Financials...for a generation no one will know these important points in this group.
2) Stay with the now "correcting leadership", hard assets in a reflationary environment will be rewarded if looking out three to five years. This is a classic pause that refreshes.
3) Last week more likely than not was a capitulation, we'll see....but extremes were reached to flush out most traders, in addition it was options and futures expiration and next week is month end quarter end.
4) There will be some surprise pre announcements to the downside and there will be lowered forward guidance for the balance of the year....this too will upset traders...look for the companies stock that goes up on these types of announcements...this will tell us if the "bad news" is in the stocks...
5) With record short positions outstanding...remember this is all largely too on borrowed money from the broker dealers....any break in the down trend will force yet more losses on the fast crowd as they are forced to cover more bad bets.....it would be easy to say the short seller is a crowded trade now.
6) JPM and BAC have been given get out of jail free cards from the US Government as well as allowed to pass go and collect a lot of money....the fed has signaled the biggest abusers of capital (BSC and CFC) will be reorganized in an opening balance sheet as Take Unders...this will save time (years) and hundreds of millions (not) spent on lawyers. The second and third tier hedge funds will close shop soon. As will the underfunded private equity boys.
7) The global infrastructure play is alive and well....and growing.
8) Europe, Australia, China and India will soon lower their interest rates too.
9) US treasuries are a crowded trade.
10) Trillions in cash (globally) now sitting on the sidelines will buy stocks 10% higher from here in a probable market reversal later this year.
11) Always migrate to the best run leadership companies in a market like this....never chase or bottom pick the losers....always dead money from here forward.

"When there's a death consequence, when you are doing things that if you mess up you die, (it) causes senses to peak, (you) can see more clearly. You can think much faster. You hear at a different level. Your foot contact on the line is accentuated. Your sense of balance is heightened", said a tight rope walker last week when crossing the Hell Roaring Canyon.

Rest assured there are many traders and investors operating at peak attention now with this type of volatility.....if they have not sold yet I'm not sure what they are waiting for (maybe another margin call)....maybe they have exhausted themselves....

Danny Boy seen here looking out over the fresh mountain snow taking in the clear mountain air and likes what he sees!