The Zesty 'Fest
I can't believe that Hoofy ate the fillet!
It's another tequila sunrise
Starin' slowly 'cross the sky, said goodbye
He was just a hired hand
Workin' on the dreams he planned to try
In what is quickly becoming a staple of Minyan pride, we gathered at Rosa Mexicano last night for the weekly edition of Succofest. It's tradition, of sorts, and we generally split the time between discussing the world we live in and the enjoying the friendships we share. The Tuesday crew was particularly robust as Scotto Reamer, John Succo, Rich Gula, Greg Collins, Fokker and myself sat on one side of the roundtable while Hoofy, Boo, Daisy, Snapper, Sammy, Fester and intern Mike shared the other. The following is a brief synopsis of the first half of the conversation:
Boo: Lemme get this straight...Cisco (CSCO:NASD) was a relative bummer but now that it's out of the way, we can buy stock again? Pass the guac, please, and get Don Julio on the horn!
Hoofy: (leaning back with his arm draped around Daisy) You just don't get it, do you? This juncture isn't about one company, it's about a confluence of psychology (performance anxiety), structural (corporates), technicals (sub-sector acne) and momentum. Those are powerful forces, bruddah, and if you're gonna pin your tail on one donkey, you're cut off.
Rich: I wrote an article on Friday after talking to a buddy of mine who runs money. He, like many others, was having a tough year and facing redemptions on December 31st. So what did he do? He loaded himself to the gills with beta in August and has been pressing his bet ever since. And as long as the "trend" is up--which it is--he's gonna wait until the other underperforming hands are forced to buy (long squeeze).
Toddo: That's the game, I suppose. The fund community has become so crowded, the market has morphed into a big game of musical chairs. He who holds the bag at the end of the song isn't gonna find a chair.
Succo: I've heard this song before.
Scotto: Oh, for sure--but as long as there's a herd, there will always be fresh ears hearing what they want to hear. Markets are non-linear, as there will always be quantifiable and unquantifiable aspects to the influences. Right now, the current trend, up from August 13th, is being embraced by the vast majority of investors. Basically everyone is already out of their seats and hearing the music; very few folks are looking for seats. Why and how this process plays out like this is incredibly interesting but ultimately unimportant. Turning points in trend are defined by the point at which the most investors embrace that trend.
Collins: I understand that but while Boo was looking at the juke box, someone caught ten points in Taser (TASR:NASD) and couldn't care less why or how it happened.
Sammy: Yes, Greg, there are clearly opportunities on the journey to the destination. Nobody is denying that. I think the broader concerns are focused on the mechanics of the swing rather than the results of the at-bat. A frenzied trading environment sucked in a lot of newbies into the market in 1999 and irradiated many of them shortly thereafter. We're hearing the same sexy sirens but the stakes have been raised--now we've got a hedge fund bubble with increased leverage and attendant risk.
Toddo: I'll go back to the importance of identifying a suitable horizon and juxtaposing an appropriate risk profile. There is nothing wrong with gaming the nets or nuts on a daily basis as long as you understand your role in the process. And if you're a big picture investor, the noise shouldn't consume you on a daily basis--that's wasted energy. However, the one constant in both approaches is the necessity of discipline and the managing of risk. We remain in the early innings of a pretty meaty weed out and we wanna see every Minyan make it to the other side.
Succo: I think you hit the nail on the head. Too many traders view this business as a game and don't adequately understand the attendant risk.
Daisy: (batting her eyelashes) But that's why Minyanville is here, big John, to help explain the how's and why's. The vision has never been to tell folks to buy this or sell that, it's about providing the information necessary to make better and more informed decisions for themselves. The guru shelf-life is very defined but the power of knowledge lasts a lifetime.
Snapper: What do you think of the coming Hump?
Sammy: I think the collective focus will shift from Chambo to Elmer midmorning and we'll see a tale of two tapes (pre- and post-FOMC). The path of least resistance is still pointing north but as everyone is now intently staring in the same direction, it raises the risk that the lack of shorts and overbought conditions will lead to pullback or, worse, a trap. Remember, we could come down a bunch and still hold the acne levels breached last week. Perspective and patience will be important elements of any trading strategy.
We sat back from our chairs--top buttons undone--and looked at the sporadic remains of what was a hearty Mexican meal. I'm not sure if the spate of silence was a function of food coma or a simple digestion of the conversation. It didn't matter much to me--I looked around the table, face by face, and felt immense gratitude that I was surrounded by such quality people on a daily basis. I raised my glass to my friends and offered the final toast of the evening. "To knowledge!"
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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