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Smell Test!


...liquidity is a coward. When you need her most, she runs away and hides.


One little problem that confronts you
Got a monkey on your back
Just one more fix, Lord might do the trick
One hell of a price for you to get your kicks

(Lynyrd Skynyrd)

Good morning and welcome back to the flickering pack. A new week is here and it's ready to go as the critters prepare for a really big show. With April expiration in the rear-view, traders cast their eyes towards a new slew of earnings and a whole lotta questions. In particular, one must wonder what's going on in the metals markets as we watch, in some cases, 20% swings in a single session. I've noodled alotta tapes in my time--from Rubles to rubble to stock market bubbles--and opined last week that something smelled like smoke. I dug a bit deeper on Friday, chasing down traders "in the know," but was unable to unearth the source of the stank.

U.S Federal Reserve Vice Chairman Roger Ferguson, addressing the IMF's steering committee, chimed in with some seemingly serendipitous comments at Saturday. "Although financial systems have proven resilient to quite significant market adjustments or cyclical developments in recent years, the possibility remains of more severe shocks accompanied by deterioration in market liquidity." he said, according to Reuters, "Such a scenario could expose vulnerabilities in risk management, particularly with regard to complex instruments and strategies, and there are several areas in which financial institutions and authorities need to work further to strengthen resilience."

Coincidence? Perhaps. But given the warning earlier this month by EU regulators discussing the "collapse of a big hedge fund or a similar sudden financial shock," my nose is officially in scrunch mode. That doesn't mean I'm long guns and butter and short everything else--I know, as do you, that the difference between perception and reality is information, acceptance and acknowledgment. Further, IF there is blood in the hedge fund streets, we must then assess the all-important "contagion vs. containment" implications before extrapolating it to the broader marketplace.

Last night, while dining with the savvy soothsayin' sake sippin' sommelier Jeff Saut of Raymond James, we noodled the above mentioned dynamic. Jeff opined that "liquidity is a coward. When you need her most, she runs away and hides." It's a salient point by the sage seer and one that underscores an important undercurrent in today's environment. With so many traders conditioned by the long-standing dip shtick, I can't help but sense that they're being serenaded by sirens providing a false sense of security. Free markets are determined by supply and demand. In the absence of one, the other tends to assume a life of its own.

We chewed through a few different discussions as we edged through a rather enjoyable Sashimifest. At the top of my "whataya think?" list was the notion that non-dollar denominated assets will be a safe-haven in the years ahead. We spoke about foreign opportunities in general and Canada in particular. Jeff, who boldly predicted that the Loonie would trade on par with the greenback five years ago, continues to dig our neighbors to the north, citing natural resources and government surpluses. "I'm already long Canada," I said with a smile, but I definitely wanna dig deeper into potential plays as I prepare myself for the next chapter in my life.

As we left the downtown digs and shared some hugs and handshakes, the talk turned to Vail and the upcoming Minyans in the Mountains financial retreat. Jeff happens to be a big Colorado fan and has already circled his spot for our Sundance of Finance. Ojai Minyans were treated to some savvy soothsayin' money makin' vibes at the kick-off keynote before Jeff trotted to Detroit to fulfill a previous commitment. This year? He's bringin' his bride and enjoying the ride alongside a stellar stable of human capital. I know alotta folks are planning to trek to our 'fest so if you wanna smoke some S'Mores with Minyans galore, don't let another uber-early bird snake your worm!

Good luck today.


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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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