The Taming of the Shrewd
Good morning and welcome to the new dawning. Now that '03 has flew into the rear view, it's time to start the game anew. "I know I dropped the ball last year," said Boo devoid of any fear, "but things are not as they appear--all rosy, giddy, full of cheer." Will the bears fight back and gain respect or is their mission all but wrecked? It might not be what you expect so let's inspect this fine subject!
The final figures are in the books and after the dust settled, 2003 was a runaway victory for Hoofy's heroes. By ending 2003 at 2003, the NDX logged a 50% gain and effectively spanked Boo's Bandits (thank you sir may I have another!). Hindsight, which often provides wisdom for future decision making, taught the ursine uglies a thing or two about the pitfalls of greed. After three years of outsized gains, they were reminded that nothing is easy in a bear market--not even for the bears.
Bear market? After a 50% rally in tech? I know it sounds like I'm eating a silly sandwich--and I understand that all that matters is results--but let's remember from whence we came. Market perspective is a function of time and price. Pull your charts back a few years and it's clear that we're still in the throws of a defined downtrend. Granted, the bungee was a terrific opportunity to snare a few shekels but, lest we forget, past performance is no guarantee of future results.
The mindset of the masses is conditioned to focus on risk after a market decline and reward once the tape has rallied. That, in a nutshell, defines momentum investing and it's been the style with a smile this past year. We enter 2004--the election year--with a continued agenda that will loom over the investment landscape through November. Elmer and Dubya have pulled every string in an effort to create a self-sustaining recovery. While they've staked their claim to bovine fame, I humbly maintain that you can't always buy your way out of reality. As my grandfather used to say, what goes around, comes around.
One step at a time, this we know, and while the calendars may have turned the page, the song remains much the same. The caveats (frothy sentiment, insider sales, complacent volatility) have been discarded by professionals as they've repeatedly "failed." As we begin to eyeball S&P 1150--a 50% retracement of the entire bear market melt--they'll likely start to get louder. The battle remains one of an overbought (and, in my mind, overvalued) market vs. breakouts and some "relaxed" (more aggressive) risk parameters entering the new year.
We power up this morning to find the dollar squalor screaming for attention (continued multiyear lows), gold chuggin' right along, European bourses flatter than the Denver Broncos and stiff stateside futures. It's also interesting to note, at least to me, that Elmer has effectively taken a victory lap on his policy efforts to date. That smacks with irony and although it may not be today's business, please file it away for future reference.
In Minyanville news, I was slated to be out this week but Fokker's selfish insistence on a vacation forced my return to the trenches. No worries--I missed the critters and after a quick skip out of town, I'm ready to rock and roll. I may be traveling for business later in the week but nothing is set in stone (as of yet). Mr. Brodsky will be taking a much deserved break as well so thanks (in advance) for your understanding.
We'll be featuring additional commentary (technicals, metals, FX, etc.) in the coming months as we round out our educational efforts. Further, the scope of Minyanville will expand to include added features for active traders, the University of Minyanville (free of charge) and an initial foray into elementary education. In short, we're trying to create something special and your continued support is much appreciated. I sincerely hope you all had a tremendous holiday and get psyched for the new year--it's gonna be special.
Good luck today.
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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