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Wrigley Piggly


It's almost the second half -- where's the recovery?


It was a beautiful afternoon in Chicago and the critters wasted no time making themselves feel right at home. As we readied for an afternoon of baseball, the menagerie mingled with the Midwest Minyans who had come to join the fun. There wasn't a cloud in the sky as the Yankees took batting practice and Boo, dressed in a vintage Cub's jersey, was holding center court along the first base line. It was quite the scene.

Boo: It's so nice to be surrounded by fans who appreciate the efforts of the Bears and Cubs. This is my kinda city, Toddo!

Hoofy: Hey Mr. Selective thinking, have you ever heard of the Chicago Bulls? They used to have an obscure athlete by the name of Michael Jordan? Ring a bell?

Boo: Yeah, he's like 112 years old now, right? Come on now Hoofs, from what I can tell, you still think we're living in the late 1990s. Get over yourself!

Snapper: (chewing on a hot dog) Lemme ask you a question, Boo, and please don't be defensive. Why are you so reticent to buy into the recent rally? It's been a steady stair step of strength these last few months but a lotta hedge fund managers simply don't believe. Put yourself in the shoes of a mutual fund manager sitting on a pile of cash. You're staring at a calendar wondering how to juice your performance into quarter-end. Don't over-think, dude, you're costing yourself some good coin.

Daisy: (in a tight, white Knicks tee and suckin' on a snow cone) The turtle has a point, there IS a whole lotta ajita in the fund community. That's why the pullbacks are so shallow -- there are too many buyers that need to get involved. On top of that, every time John Q Public watches the tube or reads the rags, he sees stories declaring that the financial coast is clear. Individual investors are so thirsty for profits that in the absence of an oasis, they'll drink the sand!

Boo: You'd think they'd have learned their lesson by now. Sure, one of these bottoms will prove to be THE bottom but they sure are making a lot of generous assumptions. What if the uptick in first quarter earnings was a function of pent up demand (put on hold during the war)? How much of the upside giggle was due to favorable currency fluctuations or cheaper fuel? Moreover, if this jobless "recovery" continues, is it realistic to think that the consumer is gonna bail us out? They're already leveraged to their eyeballs in debt and leaning against the value of their homes!

Sammy: We all understand your thoughts, young cub, and I'm not gonna say you're wrong. However, I will remind you that a strategic view is meaningless unless you have a risk profile that adequately mirrors it. The types of things you're discussing are intermediate (and big) picture concerns, not day-to-day operational ones. Yes, there is a notable lack of pricing power in corporate America. Yes, many industries are mired in overcapacity that will take years to alleviate. Yes, optimistic assumptions for (yet another) second-half recovery abound. But liquidity has driven this market higher and until the sell-side has an agenda, your concerns are more conceptual than legitimate.

Hoofy: Maybe that explains why Boo runs around all day talking to iguanas while the bulls are talking to the Benjamins! The truth of the matter is that the S&P can trade to 950, the NDX can slip to 1150, the BKX can slide to 830 and the SOX can punk to 335 -- and they'd ALL still hold the uptrend from the March lows. Nothing like a little breathing room!

Boo: Yeah, I guess all that breathing room is why we've been seeing signs of the blow-off top. I'm not gonna sit here and say that Friday's reversal was IT, but I have been looking for signs of exhaustion and I saw a lot of yawning bulls late last week. I'm not sure if they were simply bored or if their legs got wobbly, but I do know that trading rallies typically begin on bad news and end on good news.

Snapper: (coming out of his shell) That's all well and good, Boo, but tick tock baby: Quarter-end is quickly approaching and the majority of fund managers are underperforming the indices. The closer we get to July 1, the more anxious these folk are gonna get and...

Boo: (cutting him off) ...and the more crowded the long side will become! Think about how many people have now bought into the idea that we've turned the Minxy corner. Not only are they loading the boat, they're conditioned to buy 'em all the way down. The market wasn't gonna melt when everyone was ing)" target=_blank>schvitzing about duct tape -- it was too obvious. With everyone leaning the long way, however, the path of maximum pain is clearly lower.

Daisy: What about you, Toddo? Aren't you a little hot with both legs in your bear costume?

Toddo: (looking at the collection of critters) It is a little warm, not just because it's 80 degrees at Wrigley Field, but because the fur has become an increasingly unpopular costume. Further, I've been impressed by the Minxy moxie as the combination of liquidity, anxiety and stimulus (and I don't mean tax cuts) sparked a sharp shot higher. Big picture, I've got tremendous conviction that it's not gonna end pretty. In the near term, we've gotta take our journey one step at a time and respect the forces in play. Watch our trading tells (brokers, semis, breadth), keep your eyes peeled for sellers (they've been noticeably absent of late) and don't let emotions dictate your decisions -- that will only come back to haunt you. Is the inevitable pullback "healthy" or is it a prelude to a longer lasting pain? Rallies like we've just witnessed typically don't stop on a dime (tops are processes) but the conditional "topping" elements ARE in place. How you approach this juncture is a function of YOUR style and risk parameters.

The critters shook their head in agreement and settled into their seats. It was a beautiful afternoon and we slowly sipped our cold brews as the Cubbies took the field. We knew that there was gonna be an entire week to talk tape and portfolio shape, so the market chatter was officially over for the afternoon. The umpire screamed "play ball!" Alfonso Soriano stepped into the batter's box and the crowd roared to life. It just doesn't get any better than that.

Good luck today.

position in spx

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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