Duct, Duct, Tape?
I wonder if anyone will wanna step up into a very uncertain weekend?
Ghosts crowd the young child's fragile eggshell mind
Good morning and welcome back to the geopolitical track. Yesterday, as we digested the Hump Day grump and cast our eyes to the sky, we chewed through our four primary metrics with hopes of ascertaining an advantageous assimilation. We concluded that the earnings curve would be a steep slope for Hoofy and he proceeded to trip and flip down the slippery slope. We were left with a deep crimson swim across every single sector and an eye-popping 27% spike in volatility (fear) measures.
There was a lot going on before the overseas stakes were raised but now, with the specter of increased aggression permeating an already fragile psyche, we've introduced a whole new slew of pooh. The Minx is on edge as we await the next shoe and, with earnings on deck, we're left to wonder if we've built a wall of worry or the wheels are wobblin' on the wagon. Two distinct possibilities with entirely separate profitability pictures. And you wanted to be a trader!
As discussed yesterday, we're far from oversold in the old school (S&P) while the four-letter freaks feel a bit more heelsy. That may not matter if the tinderbox formerly known as the Middle East sparks--Israel will not tolerate attacks on central cities and those in the know are suggesting that an invasion of Lebanon is inevitable. While this wouldn't be the first time they've battled, the question--for the tape and, in many ways, the world--is how surrounding nations, already agitated, will respond.
This adds an entirely new and completely uncertain dynamic to an already crowded mix of variables. And while I nibbled anew on some gold (GSS, GG) and energy (WFT) upside options yesterday (against my spate of piggy puts (JPM), I understand that there is risk to those positions. What risk, you ask? Well, peace risk, for one, and Phantom risk, for deux. Be that as it may, I continue to look to Goil, as Richard Russell has freshly coined that duopoly, as secular winners in a normalized market.
Only time will tell whether we're putting the pieces in place for an earnings season rally but my sense is that, barring resolution with regard to the captured Israeli soldiers, the bulls will be hard pressed to impress into an uncertain weekend. For, and with, my money, I'm content to keep powder dry, remain relatively balanced (alpha bits) and choke up on my risk bat. For if we've learned anything through our years together, it's that opportunities are made up a heckuva lot easier than losses.
"Hello, Toddo - I've enjoyed your writing ever since the early days of thestreet.com. Minyanville is usually a lot of fun. But this article on marketwatch.com – a dark, dark vision, yet guardedly obscure. Is it your intuition that dark economic days are ahead for the US or the entire world? Or are you forecasting mass foreclosure? If possible, please follow up with a clarification. Regards, Adele"
Thanks for taking the time to write. Yes, some of my bigger picture "visions" are indeed dark, for lack of a better word, as I cast my mind's eye towards what's to come. I struggle at times with "putting it out there" as few truly want to hear the "other side" of the upside ride. It's not a pretty picture, for sure, and as I offered in the article, I hope we can side-step the inevitable ramifications of this great central bank experiment. I want Minyanville to remain "fun," but we will always root out content with the integrity of our honest thoughts. A delicate balance indeed.
Rather than ignore the possibility of further storm clouds on the global economic horizon, I prefer to assimilate them as part of the probability spectrum as I make financial decisions that will shape my risk profile. Take me at my word, I, like many others, will greatly benefit from a continuation of the modern day Jazz Age. But while I'm open-minded in the near-term (particularly into earnings), I harbor concerns that we'll be able to ultimately emerge unscathed. That is why I write--and I'll simply ask that if you don't agree with my assessment, you choose to shoot down the thought process rather than the messenger.
A few housekeeping items before I go...
- I'll be out of the 'Ville this morning as I join my best friend at his grandfather's memorial service. Work is work and money is money but, at the end of the day, we measure ourselves by our relationships and actions. As such, please forgive my morning absence on the Buzz and expect me back shortly after noon.
- Long distance Minyans, what you standing there for? The mojo is officially in motion as we're a scant 26 (count 'em!) days away from Minyans in the Mountains: Part Tres. We've come a long way from Crested Butte and, on the heels of Ojaitis, we're looking to reset the standard for human capital in the world of finance. While there will be plenty of pros nestled in our nook, please understand that this is a family gig. Wives, husbands and kids are not only allowed....they're encouraged!
Trading tells today will include the dollar (been a contra-asset class tell), market internals (particularly if skewed 2:1 either way), beta (watch the semis and homies which exhibited relative dryness yesterday), our technical levels (S&P 200-day below--for the retest thesis--NDX 1510 above (initial resistance), HGX 200ish ('04 acne support) and BKX 108, if and when).
Good luck today, Minyans, and let's end this week with some good mojo!
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 firstname.lastname@example.org.
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