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We often say that if you're not 100% focused on your trading you are at a natural disadvantage to your counterparty. That would help explain
why I'm trading less these days, but it's not just that. This is a tricky juncture for global markets after Mario Draghi officially jumped the shark
I don't know if this is the proverbial "last bullet,
" but I maintain that NIRP (negative interest rate policy) is a world away from ZIRP (zero interest rate policy), at least in terms of the potential to trigger unintended consequences. We've spoken about the plumbing of the markets
; not only high-frequency trading (that's an entirely different dynamic) but the leverage, derivatives, and confidence that tie together the global financial machination; for a stock market at all-time highs, the fragility of the system has perhaps never been more understated.
These latest plot twists are a continuation of a manufactured "long squeeze" that has been manifesting since Y2K.
It's a horror show for free-market enthusiasts; a never-ending saga of artificial stimuli intended to ward of The Phantom of Deflation
. And while I would argue that the true counterparty of central banks is the Internet -- the most deflationary invention of all-time
-- we mustn't ignore the battles won in this ongoing war. From buff corporate balance sheets to solid stock market charts
, the bulls have been laughing all the way to the bank.
Which poses this question: Where do we go from here, both in terms of the societal infrastructure
and the capital markets? I don't claim to know the answer, but I have my suspicions. Suffice to say that my short-term exposure is measured (I'm still long Twitter
(NYSE:TWTR) from $29.99) while my longer-term antennae vibes the next secular trend
. And while I have exposure to global markets (real estate, 401(k), 529s and so forth), my faith in the active fabrication of free-market capitalism has diminished in kind.
The VXO (INDEXCBOE:VXO) is trading with a 10-handle. In other words, we're there.
Weekly Investors Intelligence sentiment indicate that bulls are exceeding bears by more than 40%; market professionals are almost, if not already, fully invested.
I've updated the Bloomberg Smart Money Index below; still a pretty wide chasm, which has traditionally reconciled to the downside.
NDX (INDEXNASDAQ:NDX) 3740 is now underfoot (and has newfound support). That's 14-year highs for the four-letter freaks, for those keeping score at home. And RUT (INDEXRUSSELL:RUT) 1120, the 200-day moving average, is underfoot as well. Take that, Karl Marx!
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Position in TWTR
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 email@example.com.
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