Is 2010 a Mirror Image of 2009?

By Todd Harrison  MAY 04, 2010 11:15 AM

Turnabout is fair play.


“Once I rose above the noise and confusion, just to get a glimpse behind this illusion. I was soaring ever higher, but I flew too high.”
- Kansas

At 3:30 PM yesterday on the Buzz & Banter, in response to a question by an Old School Minyan on whether I would dust off my seemingly forgotten bear costume, I responded: 

"I don't 'do' the costumes anymore as I've been trading less and building more. One thing I learned long ago is that if you're not 100% focused on risk, you're at a natural disadvantage to your counter-party.

"Trading and writing is one thing--it'll be ten years of scribin' vibe this July--but that, coupled with multiple melds, business travels and building the 'Ville (in this environment, no less) makes for some tough risk management.

"With that said, and for the oldest of the old school Minyans in our midst, I'll toss on the metaphorical bear suit (at dual resistance of S&P 1200 and Goldman Sachs (GS) $150, for a trade); two arms in (50% conviction) with a stop above S&P 1220 (recent highs).

"At the very least, I'm vibing S&P 1150 (first stop); 20 handles of risk vs. 50 handles reward is a decent vig, particularly into Turnaround Tuesday. Sometimes right, sometimes wrong, always honest—and never advice (I don't know your time horizon or risk profile)."

It's been a while since I've fiddled with metaphorical imagery. Some of you might remember back at the turn of the century, while running a $400 million fund and trying my hand at this writing thing, I had a tailor on premise, switching in and out of the bull and bear costumes as a function of time and price.

It was a creative way to share my relative conviction in real-time and folks vibed with that seemingly nonsensical silliness during a very tense time in the world. Unbeknownst to any of us, that was the genesis of what would eventually evolve into our Emmy Award winning Hoofy and Boo. They've come a long way and  I suppose we all have, following a Decade of Decadence chock full of historical events.

At the beginning of this year, in my Ten Themes for 2010, I offered:

"Conventional wisdom dictates that equities will enjoy further upside before facing headwinds later this year, akin almost to the mirror image of 2009. Respect -- but don’t defer to -- these choppy waves of optimism. When caught in a riptide, the surest path to survival is to swim parallel to the shore until the dangerous current passes."

While the script hasn't played out precisely as planned--the S&P lost 225 handles to start 2009 and thus far rallied 175 handles off the February low—the potential exists for the mirror image to reassert itself. Flies remain in the ursine ointment—most notably the corporate bond market, which suggests further strength still— which is precisely why I view the big picture as a series of little pictures and attempt to stair-step my risk profile with defined risk.

It's not easy, Minyans, and there's no shame in admitting it’s hard. There's only shame in pretending it's not. Keep your eyes open, your right hand up and your thoughts positive. As goofy as it sounds and as silly as it seems, thinking positive really does make a meaningful difference in our daily routine.

Random Thoughts:


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Position in S&P