By Todd Harrison Mar 15, 2005 8:11 am
Good morning and welcome back for a breakfast snack. With yesterday's action leading the way, the critters all met for an early buffet. They chowed on pancakes and scrambled some eggs while feeding their bellies and finding fresh legs. As the mercury dipped and the wind chill kicked in, they feasted at Ollie's and huddled within. The conversation went a bit like this:
Hoofy (muffin in hand): I'll tell ya, I like Toddo's stuff but the rhymes get annoying after a while! Doesn't he realize that this is serious stuff for serious critters?
Daisy: I don't know, I kinda like it. Besides, we can get old school nuts and guts financial stuff from pretty much anywhere. As long as the content is true and the insight is honest, I don't see a problem with spicing it up and making it sexy!
Boo: Yeah man, and let's face it, alotta topics we're talking about aren't necessarily pleasant and you're less apt to shoot the messenger if you have a smile on your puss. There's a difference between being a pessimist and a realist, a fact that sadly gets lost in ratings and analyst rankings.
Snapper: But how many times can you dwell on dual deficits or dollar squalor? And, to be perfectly blunt, who cares if the demand is legitimate growth or debt-induced largess as long as the screens are green?
Sammy: Depends on your time frame, I suppose. Alotta people got rich in the bubble 'cause they knew when to pull out. That's the hardest thing about trading. Anyone can buy an asset but selling as your paper gains swell? Another discipline altogether.
Hoofy: But how can you call the market a bubble when, relatively speaking, we're far from the excess that existed at the height of the mania?
Boo (with a mouth full of chocolate chip pancakes): The powers that be never allowed the market to cycle through! Forget, for a moment, that excess breeds excess (read: triple digit multiples will become single digit midgets), we're still at P/E's historically closer to market tops. And, perhaps more importantly, you're forgetting that Elmer didn't abort the equity bubble, he just sprinkled it on other asset classes. The problem--for all of us--is that the financial mechanism is intricately intertwined. So while we've bought ourselves some time, the root cancer has never been cured.
Snapper: I feel like I'm living Groundhog Day.
Sammy: He's not saying that this is today's business, Snapper, and in that respect I agree with him. There are always two sides to the tape and it's quite possible that this mess will take years to unfold. In the meantime, the structural positives (liquidity, credit markets) can add muscle to the skeletal fragility. And when you have a bubble of funds chasing performance, strange things tend to occur.
Hoofy: Alright, I think we all get the big picture bent but whatta we think in the near-term? I held my lines in the sand yesterday (S&P 1195-1200, BKX 99 (200-day)) and we're still above the 200-day in the NDX. As long as we keep those floors from becoming ceilings, it's game on for the Matador Crowd.
Boo: Perhaps we'll see a bounce-the near-term noise is always tough to game. I'll caution, however, that a slew of news is coming due in big cap brokers and that will flavor the tape. Odds are that they'll post nice earnings as a function of the M&A fray but remember a few things. One, stocks are leading indicators and the past is already reflected at current levels. Two, further bond market volatility will likely trump EPS. And three, the stochastics for the group remain toppy and sloppy as the XBD meanders under resistance (153).
Daisy: Don't worry Hoofy, Boo's a "glass half empty" type. As long as the macro asset classes are quiet, psychology and performance anxiety will manifest into quarter-end. Just watch your tea leaves (dollar, crude, bonds, breadth, beta (internets), financials) and exercise discipline in your approach. That, more than anything else, will allow you to keep your head (and wallet) in the game.
The critters finished up their feast and started gathering their belongings. They knew that yesterday's minxy meander wasn't gonna last long and wanted to get a bead on the daily dance. "Good luck today," Sammy said as he slithered towards the door, "and please complete your Minyan March Madness brackets (password: Minyans). When the dust settles and ticks stop flickering, we're all in this together."
No positions in stocks mentioned.
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