By Todd Harrison Apr 03, 2003 1:52 pm
Strong like bull!
Afraid of my own shadow in the face of grace
Heart full of darkness, spotlight on my face
There was love all around me, but I was looking for revenge
Thank God it never found me, would have been the end
(Stevie Ray Vaughn)
Alright Fokker -- if you so much as glance at my nose, I'm gonna unleash a wrath of fury on you like you've never seen before. You think the sushi fumble was bad? The travel disaster? The college girl blowoff? Do the readers a favor, kid, call me Rudolph -- I'm sure they can use the abusive entertainment!
As I sit here and watch the action, I wanted to take a moment and expand upon my thought process. My dilemma, in a nutshell, is that I "see" the upside trade but I don't "believe" it. Not in the "Holy cow, that's crazy -- I can't believe it!" way, but more in a "I've seen this movie before and it's not gonna end pretty" way. I'm simply trying to balance the two senses in a way that allows me to maximize reward relative to the incremental risk.
The bulls are clinging to the "look through" thesis and while that's proven to be false hope in the past, it'll work until it doesn't. Stocks, as an asset class, have become a vehicle in a larger game of financial chess and they're trading as a function of their macro brethren. As we've discussed, nobody is bigger than the market and we don't have to agree with what we're seeing, we just have to respect it.
There is clearly event risk in the world right now and it can come from any direction. If Iraq uses chemical weapons... if North Korea escalates... if SARS is discovered in New York City -- these are all possible events that would gap the market down appreciably. If NOTHING happens, however, these fears will be considered one of the steeper walls of worry (bullish) in recent history. That's clouding an already murky environment where the economy is seemingly getting worse and corporate America is hiding behind the excuse of war.
Are we having fun yet?
For my part, I continue to use this strength to scale into defined risk May puts and day-trade ETFs against them when the market feels dry. I'm operating under the assumption that we're trading on borrowed time but I'm also aware that timing is everything. I can accept being wrong -- it's happened before and it'll happen again -- but if I pile into the long side simply because everyone else is, I'll hold myself to task for losing money.
Anyway, I just wanted to communicate as it sometimes helps to talk it through. There's a heckuva lotta balls in the air and tensions -- globally and locally -- are high. Make unemotional decisions that are an extension of your thought process and always allow for a margin of error. Chances are, the end of the script has yet to be written.
As always, I hope this finds you well.
position in qqq, spy
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