Will the Stock Market Crash?

By Todd Harrison  AUG 05, 2011 11:40 AM

We ask the tough question.


We keep Bloomberg TV on in our office as a matter of course. As I'm operating from the east end today, I've been listening to CNBC in the background.

It's been a long time, and the Keith McCullough candor was worth the price of admission. I also enjoyed Art Cashin, for whom I have great respect, and nodded my head in agreement as he spoke of forced selling out of Europe.

Here's the thing; we've long said -- and I'm talking way back -- that perception is reality in the marketplace.

Credit of a different breed -- that of credibility -- is the issue at hand for markets at large. We posited those thoughts in 2007 before the crisis arrived, with an eye towards this.

Full faith and credit in the system: our financial institutions, our leaders, and capitalism itself.

As I now listen to pundits posture on undervalued US equities, strong corporate balance sheets, and how oversold the tape is on a technical basis (it feels to me like folks are still waiting to sell), I can't help but think of a passage I read on Minyanville a few years back.

Markets crash when -- by definition -- traditional metrics of measurement break.

I'm not saying this will happen, but I'm not saying it won't. There is a difference between a manufactured stock market rally and a legitimate economic recovery. We've been talking about it in the 'Ville for years.

If the world has finally awoken to that fact, historical precedent need not apply.

Remember, I'll be on the Buzz & Banter throughout each trading day along with 30+ of the smartest market minds I know trying to help you through the fray, so take a free two week trial if you're looking for some extra insights or help.


Twitter: @todd_harrison

No positions in stocks mentioned.

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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