Ticks that Tock
I'm the most popular kid in the class!
It's cold outside
It gets so hot in here
And the boys and girls collide
To the music in my ear
The afternoon crews continue to snooze as Sammy stopped by to watch and bemuse. "The state of rates isn't so great but the equity tape has yet to abate." How right you are, you slithering sage, I wish we could all get on the same page! The action, so far, has raised eyebrows on both sides of the fence as it represents one of two things. It's either an (obvious) opportunity to make sales or it's a (clear) signal that the Minx is absorbing the supply (and poised to rally). Which is it? If I knew the way, I would take you home!
In all seriousness, I've pretty much "put it out there" regarding my big picture view. I think the "Double D" thesis (debt & derivatives) is a scary backdrop that will exacerbate the deep rooted issues in our financial system. With the notional value of outstanding derivatives somewhere in the neighborhood of $150 trillion (nobody knows the exact number) and total debt levels that exceed 300% of GDP, the potholes are there. What remains to be seen is when (and how) we step in them.
Along those lines, I wanna take this opportunity to discuss a subtle shift in my outlook. Long time Minyans know that I've been in the deflation camp for a couple of years. A funny thing happened on the way to D-day, however, and that chug-a-lugging you hear is Elmer's printing press in overdrive. As the Fed prints money in an effort to "re-flate" the economy, they've introduced a new variable to the mix. In my humble view, the greenback supply will lead to imported inflation which, when coupled with high unemployment and sluggish growth, points to one possible outcome: stagflation.
Hoofy will argue that the dollar is firm, unemployment is fine and growth is picking up. I agree (sorta) but I must remind him that when he and I first discussed the "D" word, it was a foreign concept. Now, with it firmly on the Fed's radar, chances are that they'll pass the buck, so to speak, and exchange one issue for another. That seems to be the M.O these days and eventually, the debt spigots and dollar squalor will have to pay the piper.
This isn't today's business, per se, and my single biggest issue remains one of timing. With Dubya's electoral agenda and the global central banks in motion, it's hard to say when we'll have to pay. In the meantime, the musical chairs continue as money is moved around en masse. The one tidbit I will offer is to make sure your time horizon and trading profile are in synch. The above stated thesis has no bearing on the day-to-day nuances.
It's dicey and dangerous out there (case in point, today's semiconductor squeeze) and discipline will be the common denominator of longevity and consistency. The near-term is unclear and while layered resistance looms overhead, the bulls showed some moxie today. Levels wise, not much has changed as we remain dead smack in the middle of the range. As it stands, the fence sitters will have to continue sitting.
Finally--and I mean finally--we've got a winner for yesterday's trivia question. Leif Garrett (and his frog Maximillian) appeared in the '70's sitcom The Odd Couple. Congrats to Minyan Colin Chen for being the first to answer correctly. For that, he's won a spankin' brand new Minyanville tee and, low and behold, he chose Snapper as well! Does anybody see a trend emerging?
As always, I hope this finds you well.
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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