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Note Pad


Human Capital is the single best investment!


He'd headed west 'cause he felt
That a change would do him good
See some old friends
Good for the soul

(Bob Seger)

Good morning and welcome back to the critter pack. The Circle of Trust gathered last night for a slew of fine food and a dose of white light. The guest list was full of close Minyan friends who all view the dew through a much different lens. We shared some good vibes on the state of the tape and then dialed in to the mountain escape. After three hours, our bellies were full and smiles spread wide (by even the bulls!).

I've long maintained that the definition of professional nirvana is to do what you love, work with people you respect and serve the greater good. In that vein, last night's Festivus was the embodiment of everything Minyanville stands for. Over some tasty morsels and a few chilled drinks, sixteen of the critter's closest confidants gathered for a mind meld of the highest order.

Jeff Saut, sitting to my right, kicked off the talk by discussing the balance between the technical and fundamental approach. He noted the need for a "margin of safety" and offered that the biggest caveat facing investors today is an inability to properly manage risk. "Everyone knows how to win but nobody knows how to lose," he offered, as the rest of us nodded our heads in agreement. That is consistent with a vibe we often discuss in the 'Ville in that good traders know how to make money but great traders know how to take a loss.

John Succo, who is a gifted risk-manager in his own right, likened trading to a large game of Texas Hold 'Em. "Let the other players make mistakes and be there for the next hand," he opined, "the ability to control risk and wait on good cards is a critical element of sustained success." He continued by discussing the compression in the marketplace as traders replace volatility with volume. These "outsized positions," in his view, are prevalent in today's marketplace.

Steve Shobin, dressed in black, offered that capital preservation is the first step towards profitability. He asked some thought-provoking questions, including how pure fundamentalists control their risk profile. "Technicals, as a function of the user, offer utility in the trading process." He then spoke of the "psychological hurdles" that we all face in this business as the rest of us listened closely to the savvy sage.

John Roque opened by simply stating that "nobody uses stops!" He used a clever analogy regarding the mindset of the masses when it comes to taking a loss. "Selling a stock is like moving from one house to another. Most people live there for a reason and uprooting takes too much energy. Folks need to divorce themselves from emotion and understand that there are other opportunities in the neighborhood."

I chimed in at this point and posed a question to the table. I asked about the inherent flaws with each of the primary metrics-technicals are "better" higher and "worse" lower, fundies are a lagging indicator to prices (the news is always "best" at the top and "worse" at the bottom), psychology is intangible and the structural approach is defined by a number of non-linear elements. It was food for thought as I often ask myself these very questions when digesting the flickering ticks.

Snoop Tony Dwyer stepped up to say that there are different kinds of technical analysis and echoed Jeff's earlier vibe that a balance must exist with fundamentals. "There are various tools and plenty of interpretations to effectively marry the two disciplines." I agreed with his vibe that technicals are a suitable framework although, to this day, I'm unsure if traders follow them because they work or they work because traders follow them. My sense is that they often self-fulfill, particularly in an environment with 8000 hedge funds and precious few edges.

Scotto Reamer succinctly asked "What is the price of risk?" He hit the nail on the head from a conversational standpoint as we each scribbled onto our notepads. "Instruments each have a risk angle and the ability to measure that is mission critical." I told Scott, as I often tell the Minyans, that his complexity analysis is perhaps the most exciting approach that I've ever seen. I don't fully understand the particulars-and it's certainly still developing-but I think that he will one day redefine prevalent pricing models.

Collins and Succ bantered about the topics of conversation for Minyans in the Mountains II (note: we very much want to know what YOU want to hear from the professor panelists). Greg spoke of creating verticals (fundies, art of the chart, psychology, structural) while John opined that we should address the changing structure of the market, the role of derivatives and how to prepare for a very different environment ahead. I mentioned that I wanna also discuss topics that most folks shy away from (the role of the Fed in the financial markets?) and that planted plenty of seeds throughout the table.

Bob Grohskopf, who used to head the cash business at Deutsche Bank, talked of the disconnect between risk appetites and expectations and the relative inefficiencies in the system. I've known Bob for fifteen years (Mother Morgan) and have always held his opinion in high regard (he's a straight shooter). I agree that a lot of fat remains in the system and the Wall Street model must endure further cleansing. That dynamic, unfortunately, will continue to weed the capacity from the Street.

Minyan Mike Santoli stepped up and discussed the "professionalization of the market" as it pertains to current participants. He vibed that there are a lot of mechanical forces in play and casual investors are no longer a market moving force. He finished by offering that the role of financial media would be an excellent topic for MiM2 and I, for one, think that's a splendid idea. This is something that we've spoken about before and I think it's a critical element of mainstream fiscal literacy.

As the dinner conversation came full circle, I looked around the room and smiled at my friends. I told them that Minyanville started as a dream and it was truly humbling that they've embraced the cause. As I scanned the faces, one by one, there was a profound appreciation as we each made eye contact. I will offer the very same gratitude to YOU as we continue our journey and find our way.

Thank you Minyans, and 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

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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