Todd Harrison: Isolationism is the Other Side of Globalization
Random Thoughts on a Freaky Friday
Minyan DP writes to Todd:
Hi Todd -
I was just wondering from all the headlines today in the WSJ (Russia bans food imports from West, Argentina files suit against US, etc.) that this seems to be heading toward the dreaded "isolationism" theme that you talked about in the past with regard to global risk. Any current thoughts on this, or am I reading too much into these headlines?
Still lovin' the 'Ville. Keep up the good work!
Yes, these situations, while distinct and disparate, are connected through the lens of social mood. If you remember back to 2008, we spoke of two potential paths for the global economy. The first was "taking our medicine," which would have allowed for debt destruction, asset class deflation and a higher dollar. It would have been painful but we would have gotten through it in one form or another.
The second and chosen path was "drugs that masked the symptoms," which was the same behavior that got us into the crisis in the first place. More liquidity, asset class reflation, dollar devaluation (offset in large part by the troubles in Europe)...all leading to "tricky trifecta" of societal acrimony, social unrest and geopolitical conflicts. This is where we are now; it is a very slippery slope.
I remember 1999 as the markets began their parabolic frolic and "globalization" was the rhyme to the reason--remember China being the savior of the global economy? Well, the opposite of globalization is isolationism and protectionism and that's what we're seeing play through in spades. The end-goal of war isn't killing each other, it's economic destruction and unfortunately, those are the levers being pulled on the world stage.
Will social mood and risk appetites shape the financial markets? I would think so but I've been wrong while operating through that lens and as we know, prudence has been punished by under-performance. That's a big reason why I've been trading surgically--in and out of positions; that way, I can trip but not fall. Risk management hasn't been rewarded; instead, it's created a self-fulfilling upside prophecy that few see ending anytime soon.
So, in answer to your question, yes it's all related but it remains to be seen how it manifests. The easiest trade on the board is to hug your loved ones and maintain some perspective while it all plays out.
- I've been trading Twitter (TWTR) from the long side and SPY from the short side of late, although I've entered this session flat.
- GW Pharma (GWPH) $80 remains a monster level for this stock--and perhaps, by extension, other cannabis names.
- Speaking of that space, I had a great conversation with Gary Johnson, former NM Governor and Presidential candidate, who is now the CEO of a cannabis company. Talk about a politician with a fresh perspective.
- I think I need a vacation from my summer "vacation."
- BKX 69 is the single biggest level in the market right now.
- I think Josh is going to hurt Andi; once a player, always a player.
- I don't traffic in leveraged ETF's as a matter of course, unless it's a pure day trade.
- Seems like folks are starting to take the other side of the long SPY-short Russell bet.
- If S&P 1900 folds, the 200-day resides a bit lower at S&P 1860.
- I continue to sense that Altria (MO) will gap higher one morning on the announcement that they're getting into the cannabis space; the question, of course, is from where?
- Ukraine, Gaza, Thailand, Iraq...does anyone else see an unfortunate trend manifesting?
- What will be the Pets.com of this generation?
- Was the first Minyans in the Mountains 10 years ago already?
- I couldn't help notice this article about the new Kardashian video game yesterday....for obvious reasons.
- It's telling that we can't have a civil and intelligent debate about global issues without venom being spewed; at least through the lens of social mood.
- And, perhaps my favorite quote of all-time: "It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again, because there is no effort without error or shortcoming, but who knows the great enthusiasms, the great devotions, who spends himself for a worthy cause; who, at the best, knows, in the end, the triumph of high achievement, and who, at the worst, if he fails, at least he fails while daring greatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat." Theodore Roosevelt, "Citizenship in a Republic," Speech at the Sorbonne, Paris, April 23, 1910
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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 firstname.lastname@example.org.
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