The Thorny Crown
By Todd Harrison Sep 22, 2004 7:08 am
That's all I'm trying to say!
Run, run, run for the roses
The bigger it opens, the sooner it closes
Meddle, meddle, friend of mine
All good things in all good time
Good morning and welcome to the stormin'. Elmer arrived and he hiked up the hill as traders jumped in for a minxy good thrill. His language was measured, his voice quite assured and he seemed to be certain our ills have been cured. "The big bad event is out of the way," said Hoofy to friends at the end of the day, "it's now time to dance at the upside soiree and sniff the sweet smell of the minxy bouquet!" Will the looming long squeeze bring the bears to their knees or has this charade been a terrible tease? It's Hump Day--already?--so sit up (stand still!) as we ready ourselves for a feast in the 'Ville.
As I was dragging my lazy bones on the Stairmaster last night, I caught the tail end of an interview on one of the financial networks. The gentleman on the hot seat was brazenly bullish on the S&P complex, pointing to the action in the trannies as proof positive. I started to change the channel (I rarely watch financial programming anymore) but paused to listen to the rationale. Yes, I thought, the trannies are trading at five year highs--but does the simple fact that they're "up" mean we're good to go?
I returned home to frame my morning column (and to point to Richard Russell's latest vibe on the Dow Theory non-confirmation) but began having a Bloomberg exchange with my good friend Jordi Visser. Old school Minyans will remember Jordi as a Managing Director at Morgan Stanley, someone who I've traded insane size with through the years. He's since moved on (to his own shop) but my respect for his view remains in tact. As we discussed the 'Ville and the tape, he asked if he could speak openly. "Of course," I replied, and received this in return:
"You know I read your site every day and enjoy it. As an unbiased reader, I will tell you that it has become way too bearish. You need some bulls aside from Brian Reynolds. Too much commentary comes off with cynicism of the Fed and that everything is doomed in the long run. You may be right but my experience from reading the perma-bears (and their end of world/debt/deflation scenario) is that their view becomes boring. I think you need long-term macro bull to balance your current roster. Just an observation but shared 'cause I care."
This naturally got my interest piqued, as I always want to see both sides of every trade. "Point well taken," I responded, now sitting up and writing with newfound energy, "Do you know of any long-term bulls who paint a salient picture?" I paused for a moment before continuing, fully cognizant that I was again falling into the bear trap, "The problem is, I truly believe that this time 'is' different and there is a disconnect between perception and reality. Heck, we only have to turn on the tube to hear the Matador crowd. Again--I appreciate the input as you make a good point. Then again, perhaps you should offer the other side, maybe not as a professor (yet) but as a mailbag to start?"
I turned my attention back to my column and began to dig for more clues in the muck when I received his response. "I love the dialogue as you know but I think the important point is that there is no right or wrong answer. I could say that the S&P was at the same level in 1998 when earnings were lower, personal net worth was lower, individual holdings of equities are at their lowest asset allocation in 15 years, corporate balance sheets are their strongest ever, cash takeovers are the highest ever, buy backs are at the highest ever, real rates are the lowest in 40 years, etc. Last week I wrote that the SOX generation is focused too much on tech earnings when the same crowd already build in the bad news (SOX earnings doubled since November yet prices are down 25%). I could also easily make the bear case so there are always two sides."
I thanked him for his time and promised that I would strive for more balance. "It's the fish/bait/hook thing," I said, "and while my big picture bent is far from spent, lucidity is a function of awareness and that, my friend, is a function of knowledge." We exchanged warm wishes as I settled back to pen the rest of my morning piece. But whataya know, by the time our exchange was over, I was already done.
Good luck today.
No positions in stocks mentioned.
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