Do YOU have what it takes to be my leading man?
Good morning and welcome to the perfect storm. As Isabel arrived in the U.S.A, the bulls broke out to dance and play. The bears got blasted, the upside lasted and those caught short were just lambasted. Will the race continue as it rains or will the ursine stem their insane pain? It's freaky Friday in Minyanville and the crowd is here so come on in and join the cheer!
With the market climbing to new heights, the shorts have shared a painful plight. Why doubt the clout of the tout if making coin is what it's all about? That's the question that they share as the Minx ramps on her upside tear. Indeed, the momentum is fierce, the leadership is broad and everyone now has climbed aboard. In other words, how does one weigh the abstract negatives against the tangible metrics that seem to point to the moon, Alice?
We've spoken ad nauseum about the liquidity that's been pumped into the system by Sir Elmer and his printing plant. That injected demand, coupled with incrementally improving fundamentals and bubbly psychology pushed the tape through major resistance as traders returned from their summer vacations. After a few weeks of Sammy's salsa and a handful of preannouncements in the financial (mortgage lending) space, a new layer of shorts filtered into the mix. Yesterday, that fur was added to the bon fire of the vanities.
So here we stand. The charts look splendid across the board, portfolio managers are playing ketchup, earnings seem to be validating and the electoral agenda is in full swing. How do you balance that against the possible derailments? It's difficult (if not impossible) to guard against an exogenous shock, the record pace of insider sales hasn't mattered nor, for that matter, has the uber-crowded bull camp or widespread complacency. The bubble taught us that irrationality can outlast solvency and the higher they go, the more people believe.
The difficulty of a momentum driven market is that if you're wrong, you're very wrong. That fact has removed a lot of bears from the equation which has furthered the drive higher while, at the same time, removed an eventual throng of demand. That won't matter until it does--and until it does, focusing on the potential negatives will continue to be costly. When it does, however, chances are that the pop culture will sing a collective "Oops, I did it again!"
I can't (nor would I ever) tell any Minyan what to do--that's not what we're all about--but sometimes we can share how we do it. Hedges aren't just for gardeners, my friends, and with volatility so cheap, it may pay to toss on some cheapie downsides (if you're lugging long stock). This would allow for continued participation on the upside while protecting you from any unexpected surprises. Basically, your risk profile morphs from a "naked long" position to a "long call" position. Just a random thought as we edge into the fray.
Finally, it's D-day for the Critters Choice Awards big screen scream and when the clock strikes twelve, our animated auction will officially close its doors. Sean Michael Mueller--Bronco nut extraordinaire--enters the home stretch atop the leader board. The high bid and high noon will score a starring role in the first ever Minyanville trailer that will premiere at the Critters Choice Awards in New York City on November 12. You can almost hear Daisy--and the kids--cheering in the background!
Good luck today.
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.
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.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter