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Randoms: Big Brother is Watching!

Todd Harrison Nov 10, 2009 11:00 am


		There's massive sea change between the fear of losing and the fear of missing further upside.

George Soros discusses an entirely different crossroads.
I've been too cautious the last few months and I own that. I'm usually early, however, and while I certainly see both sides, my sense is that we'll have another 3-5 years of tough times, at a minimum and depending on when we're allowed to take medicine that cures the disease rather than being injected with artificial drugs that mask the symptoms. The ability to get from ‘here’ to ‘there’ will define the franchises of the future.
The populous view is rarely the profitable one, at least over the long haul. We all stand to gain from continued prosperity—hand raised here—and make no mistake, discussing the underlying toxicity of the financial machination in the face of a vicious rally, while honest, isn't necessarily fun.
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Then again, neither was painting the picture in 2005, warning of the cumulative imbalances in 2006, reading the writing on the wall in 2007, shorting crude at $132 in 2008 (before a 75% spill) or adopting a bullish stance in February and March of this year.
Williem Buiter, a former Bank of England policy maker, is urging folks to steer clear of treasuries, as he believes the Federal Reserve and other central banks will be raising rates next year, according to Bloomberg.
Was Fed Governor Tarullo channeling our own Peter Atwater when he said that the Stress Tests "revealed significant deficiencies in the information and quantitative risk assessment capabilities of some firms?" I mean seriously, talk about a Vulcan mind meld!
Be sure to check out Minyanville's latest offering, the Grail ETF & Equity Investor newsletter by Ron Coby & Denny Lamson. It's shaping up to be a great product - see for yourself with 2 weeks free.
I'll be hosting a Town Hall Chat at NYU on Monday, November 23. If you've got an interest in attending, please contact Spotts for more dets.
T-Minus 24 days until Festivus, our annual hoedown in the heart of NYC to benefit The Ruby Peck Foundation for Children's Education. This event has been sold out each year—which is awesome, as it's for the kids—and we expect more of the same for this soiree. It's a special time; Professors, Minyans, friends, family, great food, four bands, top-shelf and a tremendous cause. Lock your spot for the critter trot; you won't be disappointed!
Maybe that George Orwell dude was right after all? Not a shocker to me but if you're under the impression that every website you click, every prescription you fill, every call you make and every trip you take isn't being logged by somebody somewhere, you're sadly mistaken.
White light to Kareem Abdul-Jabbar as he fights a rare form of Leukemia.
The first thing my eyes migrated to this morning? American International Group (AIG), which opened 6% higher amid a slew of pink piggies. It's been a stealth tell and one that warrants a mention, particularly with the all-important BKX 43.5 slightly underfoot.
I was at the gym last night preparing to unleash fury on the hoops court—I lost twice as some on my squad forgot it was a team sport—and watched some news scroll across the bottom of a major TV station. I wasn't the only one; everyone seems fascinated with the market again, as evidenced by the incessant chatter throughout the locker room.
The first headline, stocks rally. Fair nuff. The second headline, dollar squalor. Fine. The third headline? How positive a lower greenback is as it sparks demand for US goods from overseas. That's true on its face but completely misses the bigger picture dynamic, the sowing seeds of discontent or the structural process of the carry trade.
Is it possible to have a strong capital market construct without corporatocracy?
While S&P 1100 was a brick wall in October, will you please remember that S&P 1120 is the level of lore we've been eying all year?
Even if technical analysis is but one of our four primary metrics?
"The IMF has essentially thrown gasoline on the fire by talking about the risks of a dollar funded carry-trade while noting that the currency remains overvalued. Telling traders to refrain from putting a trade on but advocating the fundamentals of part of it is like putting ice cream in front of a child, telling the child not to eat it, and then walking out of the room. " --Mike O'Rourke, BTIG
Have you joined the Minyanville Facebook Community? If you're a Tweeter (Twitterer?) you can follow Minyanville here.
Over in Tells-R-Us, breadth is balanced, the dollar is flattish and there's not a lot going on in commodity land with a half hour under our belt. The financials have a pink hue (BKX and XBD) and beta (ex-Baidu (BIDU)) and the semis are better bid, paving the way for some potential N's over S's.

Minyan Mailbag: Long Term Investing

Todd,

In some of Kevin's articles he mentions that 4Q 2009 will be pivotal time period for long term investors. That while he still anticipates the likelihood of downward correction providing opportunity for long term investors to put cash to work, he did see a scenario where the markets could be higher and he'd be looking to invest long term funds. Either way 4Q would give a clue as to the market direction.

Do you also think 4Q 2009 will give long term investors the signs on which way the market is heading, or do you think that answer comes further out in 2010? I got to tell you, this "capital preservation over reward chasing" strategy is painful when the market is going straight up.

-Minyan Brian

Brian,

I'm not entirely sure 4Q will hold long-term clues; with performance anxiety running rampant, emotion will skew investor's risk appetites and by extension, shape the tape into year-end. The action in the credit markets—coupled with central bank spigots and performance anxiety—introduces the possibility of a melt-up. That's why risk definition, via the technical levels we've discussed, offers nice contextual risk management.

As for capital preservation being painful, it depends on how you look at it. The broad market is still down 30% from October 2007, so one could argue capital preservation was very smart. I understand your point; I'm simply offering perspective as we field an abundance of information and assimilate it in real-time.

I would also note the massive sea change between the fear of losing and the fear of missing (further upside). It's now the polar opposite of what it was in March--and dare I say, much closer to the mindset back in October 2007. That doesn't mean we can't rally--the tape is stronger than a mule's breath--it simply warrants consideration as we allocate our hard earned coin.

Hope this helps,
Toddo

R.P.

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Comments (4)

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Mr Bacan

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11-10-2009, 1:58 pm
Toddo, Two quick comments: Big brother: Did you see 60 Minutes, where our own government is afraid of "back-doors" being put into microchips by foreign spies. If this is the case, then one should assume all internet tra Read More

Jim M

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11-10-2009, 2:40 pm
Did you know that 99% of the bankers and brokers out there are giving the rest a bad name? Johnny Lunch Box JPM Read More

Mr Bacan

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11-10-2009, 4:37 pm
Toddo, Pepe, Jim M, Those jokers over at despair.com just put out a new catalog. Included are: Hope: May not be warranted at this point Bailouts: From each according to his ability- to each according to his lack ther Read More

Lee Stockhamer

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11-11-2009, 10:55 am
Was it the stress(less) tests that revealed the banks criminally negligent risk controls or the Bankruptcy of those same banks that laid it bare, requiring fake tests (which ignored the soon to be fatal counter-party risks) to prevent public panic an Read More


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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 todd@minyanville.com.

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