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The Weird Beard


A lower opening would have been more bullish!


Is it getting better
Or do you feel the same
Will it make it easier on you now
You got someone to blame


Good morning and welcome back to the close shave. With all of the news hitting the tape, the bovine will try for a Friday escape. It could be much worse, they know one and all, as they try to stop this dangerous fall. "The action I see is driving me crazy!" said Hoofy the bull as he sucked up to Daisy, "The Matador Crowd is trading 'em lazy and '05 returns have gotten quite hazy." Can they make a stand and rally as planned or will the supply simply crush the demand? It's freaky--it's Friday--it's sure gonna thrill so roll up your sleeves as we head to the 'Ville!

There's nothing like a little crimson to empower the chicken that used to be little. Boo spent the last two years walking around like Geoffrey Rush in Shine, mumbling about the reckless Fed and a feeble financial fabric. Pictures of Alan Greenspan and Franklin Raines were pasted on his dart board, tormenting him each time he walked into work to power up for pain. The combination of time and price wore down his will and once violent conversations eventually dwindled to whispers. Credibility? We're talking pure self-esteem here as the Red Dye cry became a prolonged introspection.

We all see the not-so-subtle shift in the current dynamic and the question we must ask if we're in the denial, migration or panic stage. It's impossible to assess that question without first assigning a time frame and, for purposes of this discussion, we'll focus on the intermediate to long-term. In that sense, we can make the case that most are still denial as the VXO is near all-time lows, sentiment remains skewed to overt optimism and folks seem genuinely befuddled for the first time in recent memory.

Most of the traders I talk to not only missed the '05 move but got spanked pretty good. Now, with the NDX already down 6% (and the S&P on the verge of breaking the neckline of a three-month head and shoulder formation), lotsa players are seemingly frozen. The upside tries and false breakouts (Google (GOOG)) have been costly reminders that there are serious agendas in play. The fact that everyone was leaning long for the "easy" seasonal trade is partially responsible for the pounding. The more daunting question in the supply/demand equation is: what happened to the inflows?

The liquidity pity has manifested on a few different fronts. Brazil is off 10% to start the year, Gold has gotten hammered for 7% since the December high (note the 200-day looming at $410) and the small caps have experienced some serious shrinkage. Even the corporate bond market, which has been the voice of reason for the last eight seasons, seems to be sitting up and paying attention. Brian mentioned in his excellent morning missive that General Motors (GM) concerns have triggered more rotation than migration but we need to keep an eye on that complex for signs of widening.

I'm not sure if the pfffffft! you hear is an attempt by the Fed to let some air out of the bubble but they may be peeking at the other side of the corner. The full court stimuli press never found the traction they hoped for (negative real rates and this is the best we can do?) and the dilemma becomes one of degree and deeper holes. Elmer is now talking to a consumer that is on the defensive and leveraged to the hilt. Will he let the dollar further devalue (eroding the basis of our investments) or continue to feed drinks to an already belligerent drunk? I'm not sure there is an answer to what ails us but I sure hope investors are asking themselves honest questions.

It's impossible for me to offer advice on what you should do as I am not privy to your financial situation. What I can say--and what I have said through bear and bull phases--is that discipline is warranted and the probability spectrum remains wide. It's easier for me to "see" the dark side as I believe it's inevitable. At the same time, desperate central banks and an emotional landscape tend to permeate longer than most folks believe it can. Respect both sides of the equation and hit for average rather than power. In the end, we can't win the game if we're no longer in it.

Good luck today.


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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

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