The Long Kiss Goodnight
Dude--you're starting to scare ME!
Good morning and welcome to the screwy market. The Minx wasted no time getting down to business yesterday and quickly answered our question regarding the legitimacy of Friday's demand. The specter of hope once again proved fadable as Monday's moody blues put a damper on the brief enthusiasm. Can the bulls shake off their flaccidity and massage the upside or will the bears performance anxiety shift to the south? It's Tuesday in Minyanville and we've got a date with destiny so pucker up, buttercup, and let's embrace the beast!
One of the most difficult dynamics of trading is knowing when to implement a particular strategy. History is littered with investors who were spot on in their assessment but early (or late) in their execution. As the obscene bubble inflated beyond our wildest imaginations, seasoned traders were carried out en masse as they watched tech stocks rally multiple points per day. When the pin finally pierced the mania, only a handful off bears were still around to collect their profits and redeem their reputations. It was irony at it's absolute worst--the very bets that put them out of business would have been some of the most profitable in history.
Fast forward three years. The carnage is so severe that Wall Street has become a four letter word. Brokerage houses are burping up good will, corporate America is shedding capacity at every turn and the entire trading dynamic has become a battle. The natural question on everybody's lips is: when is enough, enough? Haven't we paid the price for our gross negligence? Doesn't the business cycle have to eventually turn? I mean--we're AMERICA--this isn't supposed to happen to us!
I love our country and if you cut me, I'd bleed red, white and blue. Still, patriotism doesn't equal a bull market just as a good company doesn't equal a good stock. We're wading our way through one of the most unique periods in history and, as such, we must find unique ways to secure profitability. I continue to feel that we're in the early innings of this bear market and if we're to prosper, we first must appreciate that the environment will be littered with landmines. I don't mean to infer that our market will slide off a cliff--that would be too "easy." Rather, if my fears are correct, the cancerous decline will continue to eat away at the market until we eventually find a level and flatline.
Now, before you race to your email to tell me I'm too bearish, understand that this thesis, by and large, assumes a minor role in my everyday trading. My style dictates that I view the big picture as a series of little pictures, assimilate the metrics and formulate a strategy that makes money along the journey (rather than the destination). For all intents and purposes, my big picture concerns factor more into my lifestyle choices. I rent (rather than own), avoid debt at all costs and attempt to preserve capital whenever possible. In other words, I force myself to remain open-minded each day but, behind the scenes, I'm preparing for a long, hard road.
Will a quick resolution/avoidance overseas alleviate my equity anxiety? It will surely help to augment the collectively psychology and the market should rally in knee jerk response. Unfortunately, war is only one variable on our dirty laundry list and as it didn't cause our current dilemma, it likely won't offer a long-term solution. Stocks trade as a function of time and price--and due to the massively inflated prices of the past, it will likely take a long time to heal.
I'll explore and examine today's trading landscape in the following posts but I felt that this topic needed to be addressed. There's sure to be bullish phases nestled in the bear cycle and, rest assured, there will be periods when it feels like we've turned the corner. However, the opposite of love isn't hate--it's apathy--and I believe THE bottom will be put in when everybody stops trying to game it. Obviously, this is simply my (humble) opinion and it's entirely possible that I'm completely wrong. I hope I am--for all of our sakes.
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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