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Dysfunction Junction


Good luck, my friends, and play like a Minyan!


Good morning and welcome to the fork in the road. They say that wounded animals are the most dangerous and that certainly seemed to be the case on Friday. After absorbing a trifecta of bad news, all signs pointed lower as the opening bell tolled in the week's final session. As the bears swooped in for the death knell, however, the bitter bovine bit back and chased the scared shorts higher into the weekend. Once again, the fear of missing dominated the mindset of the masses and when it was all said and done, the much discussed support zones were still in tact.

It seems as if the world is one big rotating issue and that's only added to the crankiness of the Minx. One could argue that after the gross magnitude of the bubble, the initial slippage was intuitive and the laws of gravity were a matter of time. After three years of melt and muck, however, 2003 is shaping us as the most difficult environment yet. The short side is no longer a novel concept and the forth score is proving to be more difficult endeavor for the bears. With geopolitical tensions at a breaking point and the global economies fragile at best, the ursine can smell blood but they can't seem to finish dinner.

Everyone seems to have a variant opinion when it comes to our current juncture and that's being reflected by the choppy action. While our individual perspective certainly factors into the trading process, the ability to grasp an aggregate psychology will ultimately dictate our success. There's a fine line between having a viewpoint and projecting it and knowing the difference is a subtle yet determinant factor of profitability. Further, it's not enough to be right in your assessment of a situation, you've got to be spot on with your timing if you hope to yield results.

I've been juggling the daily inputs and ever-changing variables as I attempt to craft a risk profile and devise a navigational strategy. After careful consideration and considerable consternation, I've arrived at the opinion that the single largest issue on our trading plate is one of unity. It's a foregone conclusion that Saddam has not disarmed and, if necessary, the United States will knife through Iraq with deadly precision. While the ramifications of such an action--or, for that fact, inaction--remain uncertain and potentially ominous, the biggest financial threat, in my most humble opinion, is the inability of the U.S and U.N to get on the same page.

This isn't a defense or indictment of the United Nations and my intention isn't to evoke a debate on that subject. I don't have the answer to what they should do and, quite honestly, that's not the function of this column. I'm more concerned with the potential fallout of an attack if, in fact, it's not endorsed by the security counsel. My fear is that the dollar would come under severe pressure and that would be the final nail in the equity coffin. Again, this is conjecture at best but as a fund manager, I must factor in perceived risks and that's at the top of my list.

While my macro concerns have (and will continue to be) in my mind, I also understand that profitability lies in the journey rather than the destination. As such, I'll view the big picture as a series of little pictures and humbly hang on for the ride. Within the context of the bear cycle (that I fear will last many years), there are going to be bullish phases that litter the landscape with false hope and empty promises. I "see" one of those periods approaching but I've yet to find a trading "bottom" that I'm comfortable with. I'll continue that search one step at a time but, as it stands, I believe a sturdier (or more traditional) foundation is necessary to support a stiff lift.

Is unification or immediate disarmament the cure all for the bear market blues? I think not--but with perception dictating reality and the reactive ranks bullying the tape, we must appreciate the psychological moxie currently in play. In my perfect trading scenario (which is likely asking too much), we'll get a hard spill over the next week or so that will set the stage--and align the intermediate ducks--for a sustainable lift. When we see massive put buying (as opposed to the upside strategies currently in place), a surge in despair, a definitive break of the October lows and bid wanted situations, I'll be more inclined to unleash Hoofy on the long side. Are those variables necessary? Absolutely not--but in our search for readable tea leaves, those historical signs would be a welcome development.

These are stressful times, my friends, and there is a natural tendency to let frustration color our financial choices. Discipline and patience will prove to be our staunchest allies as we wade our way through these treacherous times. Find a risk/reward equilibrium consistent with your unique needs, remove emotion from the decision making process and, above all else, remember to think positive. If you spend all of your energies stressing about where we're going, you'll likely forget to enjoy the trip--and that would be the worst trade of all.

Good luck today.

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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