By Todd Harrison Jan 27, 2004 8:58 am
Dare to be different!
Good morning and welcome back to the toothpaste attack. Yesterday's Snapper awoke the stock nappers as our turtle dressed up (he was looking real dapper). The terrapin stud was again out for blood and poor little Boo got caught in the flood. "I'm thoking, I tell ya, from here underneef," he said with a lisp as he spit out his teeth, "I can't thake anymore of this grade A prime beeth and I'm thonna cave in if there's not thoon releath!" Will our bear be apprenticed by a short selling dentist or will Hoofy keep playing the dental hygienist? It's a spankin' new day in the Minyanville fray so let's take a smell from the minxy bouquet!
Did you ever play truth or dare when you were younger? You know, it was that kissy game when you had to choose between telling the truth or paying the price (now that I'm older, I wonder why I ever chose the truth!). That's kinda where we are now in the market. The truth, for metaphorical purposes, is the breakout (and leadership) of the financials, the strength of the internals, the intramarket rotations and the corrections that have been a function of time (not price). That's what we've seen and at the end of the day, performance doesn't lie.
The daring aspect of this juncture is the musical chairs that continue to shuffle. I dare someone to argue that there isn't speculative excess in the marketplace (see Research in Motion (RIMM:NASD), Taser Intl. (TASR:NASD) or any number of high flying pink sheeters). I dare someone to make the case that the historic levels of (bullish) sentiment and widespread complacency is a positive. I dare someone to point to any bubble in history that digested its excess in three short years. If the greatest reward accompanies the highest risk (and vice versa) then the victors are surely getting spoiled.
In the absence of an exogenous shock (or sheer exhaustion), the greater fool theory is making fools of the bears. The once proud ursine are now an endangered species and the poachers have four hoofs and a nose ring. Armed with recent history and a rolling justification of valuation, bovine abound and they're pounding Boo like a chicken cutlet. What, prey tell, will turn the tide and stop the momentum? And, for purposes of the trading crowd, how will we know when the music is indeed over?
We know that the panic phase of the denial-migration-panic trifecta is always the most pronounced. The issue, in a nutshell, is determining which of the above scenarios is in play. It's been quite some time since the bulls had a gut check (and the bears found a bone) but waiting (searching) for those cracks has been the definition of frustration. Much like last March produced few clues that forecasted clear skies, the perfect storm (the other way) will likely arrive similarly unannounced.
Is next Friday's jobs data too obvious? The bulls argue that employment is a lagging indicator and productivity more than offsets the lethargy in that arena. The bears will grumble that the Fed can't manufacture jobs (as they have liquidity) and, ultimately, the house of cards that is debt and wealth creation (via market gains) is one of the all-time great Ponzi schemes. Quite possibly, both may prove to be true, particularly if Senor Soros and Professor Reynolds are correct in their respective assessments.
I would liken this environment to a teenager overwhelmed with hormones. There is unbridled enthusiasm, a certain naivety, plenty of breakouts and an occasional blemish. As with all adolescents, however, there will also be trials, errors and humble reminders of our own mortality. Before you lock eyes with this beauty and fall in love, remember the lessons learned the last time your heart was broken. For at the end of the day, you only have to answer to yourself.
Good luck today.
No positions in stocks mentioned.
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