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Fear Factor


Be proactive while the rest of the tape is reactive.


My time coming, any day, don't worry bout me, no
Been so long I felt this way, ain't in no hurry, no
Rainbows end down that highway where ocean breezes blow
My time coming, voices saying, they tell me where to go

(Grateful Dead)

Good morning and welcome back to the shivering shack. We awake for the grind with a lot on our mind after heeding the words that were issued in kind. We knew it would come, this more cautious tone, that paints a tough tale of dangers unknown. "We're not gonna sit by ourselves and just hide," said Daisy the cow with a huge sense of pride, "We just gotta take this next step while in stride and weather the storm that's been brewing worldwide." Will the Minx even blink on the way to her shrink or is it time to think of a tape on the brink? Come with us please as we shake off our jitters and find a sound mind in the city of critters.

Terror is a touchy topic on Wall Street, and for good reason--those of us who were there, and those watching around the world, will forever be haunted by the images etched in our minds. When a mindset is that fragile....that raw...the mere mention of further fury sets off a chain reaction of unanswered questions. Is it simply a matter of time before the unspeakable happens? Can we really anticipate--or worse, even stop--the next terrible tragedy? Are we, as a people, fully aware of the motivations that precede a "heightened alert?"

Regardless of your view--whether you sense that the war will come full circle or believe that fear is being used as a political card--you must respect the collective sentiment. Fear and money are the primary motivators in our society and they manifest daily with red and green across our screens. We can speak all we want about the November elections but investors cast their ballots each and every day. Trading, in its most basic form, is trying to tally that total before the results are actually announced.

Psychology, the most subjective metric, will clearly be dictated by the perception of risk. While it remains my belief that a disconnect exists in that regard, there is no way to tell when it will come to pass. Be that as it may, the structural elements are equally troubling as our energy stretched post-stimuli economy is susceptible to system shock. Toss in troubled technicals and decelerating fundamentals and, well, it's somewhat surprising that so many are sanguine.

Today's session assumes great importance as the price action will dictate the reactive mindset. The early morning futures have digested this latest warning, for the most part, and the ability to rally in the face of bad "news" will embolden the bulls. Conversely, as discussed above, there are four shaky legs under our trading table and Minyans should give thought to the risk on their books. These are difficult times, my friends, and the onus is on us to step up our game.

Good luck today.

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