The Situation & The Answer - 02/01/10

The Situation
2/1/2010 7:47 AM EST

Is it me or are the characters on MTV's 'Jersey Shore' beginning to resemble those in industry and politics these days?

 

"This situation is indescribable. You can't even describe the situation that you're about to get into the situation."

-- Mike "The Situation" Sorrentino, "Jersey Shore"

As "Jersey Shore's" Jenni "Jwoww" Farley likes to say, "Yo, it's gorilla central out there," so let's start with some humor.

Break in!

After the market closed on Friday night, MTV announced that another season of "Jersey Shore", consisting of 12 episodes, has been ordered and will be aired in the summer!

"Jersey Shore" is an enormously popular MTV reality television show that follows the lives of eight housemates ("Real World"-style) who are spending the summer in Seaside Heights on the New Jersey shore.

"Life imiates art far more than art imitates life."

-- Oscar Wilde

Is it me or are the characters on MTV's "Jersey Shore" beginning to resemble those in industry and in politics these days?

Consider:

• Angelina "Jolie" Pivarnick, the outspoken New York City bartender who proclaims herself as "the Kim Kardashian of Staten Island" and who causes conflicts within the Shore house is MTV's version of polarizing Speaker of the House Nancy Patricia D'Alesandro Pelosi.

 

• Michael "The Situation" Sorrentino, the cocky assistant manager of a Staten Island fitness center who once worked as an exotic dancer is a romantic icon with a sensitive side. He seems to be the MTV variation of Senator-elect Scott Brown of Massachusetts, who once posed nude for Cosmopolitan.

 

• Nicole "Snooki" Polizzi, the Upstate New York aspiring vet technician, was at the center of controversy last year when a man punched her in a bar during the first year of MTV's "Jersey Shore". She is a romantic and a dreamer, but she keeps getting hurt. Her fate reminds me of former North Carolina Senator Johnny Reid "John" Edwards' wife, Elizabeth.

 

• Jenni "Jwoww" Farley, the Long Island club promoter, has a steady and seemingly faithful relationship with her boyfriend that is threatened on the Jersey Shore -- the possible MTV equivalent of Sarah Palin, who I suggested will dump her husband (Alaska's "First Dude" Todd) in my surprise list for 2010.

 

• Paul "DJ Pauly D" DelVecchio is a disc jockey who owns a tanning bed in his Rhode Island home. His dark good looks seem to match those of former Countrywide Financial Chairman Angelo Mozilo.

 

• Ronnie Ortiz-Magro is a muscle-laden ladies' man from the Bronx who is intent not to fall in love -- it's also hard to understand his pronunciations. He seems to be physically (and verbally) the MTV equivalent of the Governor of California, Arnold Schwarzenegger.

 

• Sammi "Sweetheart" Giancola is the Hazlet, N.J., native who calls herself "the sweetest b---- you'll ever meet." She might be MTV's version of Brooklyn born Senator Barbara Levy Boxer of California.

 

• Vinny Guadagnino comes from a traditional Staten Island Italian family. A self-proclaimed "mama's boy" he comes close to either former New York City Mayor Rudolph William Louis "Rudy" Giuliani or former Chairman of the New York Stock Exchange Richard A. "Dick" Grasso.

GTL -- gym, tanning, laundry. And you have to stay fresh to death!

The Answer
2/1/2010 8:15 AM EST

Containing individual stock losses through risk-control will be a crucial strategy for the balance of 2010.

Let's move from "The Situation" to the (possible) answer.

There may be trouble ahead
But while there's music and moonlight (moonlight and music) and love and romance
Let's face the music and dance

Before the fiddlers have fled
Before they ask us to pay the bill and while we still have the chance
Let's face the music and dance

Soon, we'll be without the moon
Humming a different tune - and then...

There may be teardrops to shed
So (but) while there's music and moonlight (moonlight and music) and love and romance
(Let's face the music and dance, dance
Let's face the music, let's hear that music)
Let's face the music and dance.

-- Irving Berlin, "Let's Face the Music and Dance"

"Let's Face the Music and Dance" was written in the mid-1930s, a disturbing period for the U.S. economy and a time in which bad news was breaking in Germany, Spain, Italy and the rest of Europe. Similar to the sentiment in Irving Berlin's lyrics that are captured in Fred Astaire's voice, we will not likely have the music and moonlight in 2010 that led to love and romance in 2009. As in 1936 when we began to fight off the domestic malaise of the Great Depression and encountered the powder keg developing in Europe, there remains "trouble ahead" as after the "fiddlers fled" we will have to pay the bill and adjust to the new normal.

When I evaluate the positives and negatives (and attach weighted probabilities to them), my baseline expectation for a 5% to 10% drop in the major indices this year seems likely. That is to say, I anticipate more malignant economic and profit outcomes over the benign ones.

Much can and will likely change over the course of the year to change my projection, and I fully expect, as the trends become more definable, to change with it. Given the facts today, however, I continue to anticipate a slight dip in the market indices over the next 11 months.

Given this framework, I view one's overall equity exposure decision will be the single most important determinant of investment returns in 2010.

In the range-bound and relatively trendless market that I anticipate, the second most important driver of returns will be superior stock selection.

Containing individual stock losses through risk-control will be another crucial strategy.

The fourth most important determinant of investment performance may well be the identification of meaningful macro trends and the development of solid, well-thought-out investment themes (both long and short).

The final reagents to delivering good returns could be selling call and put premium and opportunistic short-term trading.

In summary, while we all wish to "walk in the sun once more" ("Stormy Weather") and have our market moment of joy, we might have to wait until 2011. In the meantime, there are a number of strategies mentioned in today's column that can help us through the current market undertow.