Monday Morning Quarterback: When Pigs Fly
The Swine Virus attacks social mood.
It's seasonably snazzy in the big city and the masses migrated from cramped quarters to enjoy the warm weekend weather. As cabin fever fades in the rear-view mirror, an outbreak of a different and more disturbing breed is dominating headlines. We do a lot of things in Minyanville but offering expert opinion on the intricacies of a mutant strain of swine flu isn't within our wheelhouse. What we can do is monitor the spread of this virus-which, as of Sunday, has 1,400 suspected infections and at least 86 suspected deaths in Mexico, Spain, British Columbia, Nova Scotia, New York, Ohio, California, Texas, Kansas and New Zealand-and share that the CDC recommends washing hands frequently, avoid touching your face, covering your mouth and nose when sneezing and saying home while sick.
Old school Minyans remember the SARS scare a few years ago, an outbreak that was seemingly contained before it spread on a global scale. This particular virus is hopping continents at a lethal pace and the has now declared a public health emergency in response to what some officials fear could be the leading edge of a global pandemic.
In terms of the financial markets, the specter of global pandemic is perhaps the last thing the tape needs as it sits at a critical technical crossroads with a game changing stress test catalyst afoot. Minyans will recall two Fridays ago that Hoofy was knocking on heaven's door as he eyed acne above S&P 875, only to walk into five crimson fingers on Monday. We touched on a certain sense of Déjà vu Friday on the Buzz when we found ourselves sitting at the exact same set-up.
Remember that social mood and risk appetites shape financial markets. Should this swine virus resemble mad cow-bad, but not biblical-we will all breathe a serious sigh of relief. As we wrap our heads around exactly what we're looking at-including the currently unspoken potential that it's man made-we must assimilate all scenarios into the probability spectrum of return.
Through a broader lens, the potential costs are frightening. The World Bank estimated last year that a flu pandemic could cost $3 trillion and result in a nearly 5% drop in global GDP, according to Reuters, while estimating that more the 70 million people could die worldwide in a severe pandemic. We often talk of the difference between loss and loss in the 'Ville and I'll ask ye faithful to maintain that perspective as we find our way.
With that in mind, some Random Thoughts as we kick off the first fifth of our freaky week:
We do a lot of things in Minyanville but offering expert opinion on the intricacies of a mutant strain of swine flu isn't within our wheelhouse. What we can do is monitor the spread of this virus-which, as of Sunday, has 1,400 suspected infections and at least 86 suspected deaths in Mexico, Spain, British Columbia, Nova Scotia, New York, Ohio, California, Texas, Kansas and New Zealand-and share that the CDC recommends washing hands frequently, avoid touching your face, covering your mouth and nose when sneezing and saying home while sick.
- Through the lens of perspective, I'll share that the Saturday night Grateful Dead Garden Show was stellar, featuring Cosmic Charlie, China Cat, Shakedown, Ship of Fools, He's Gone, Cassidy, Sugaree, St. Stephen, Uncle John's Band, Unbroken Chain, Gimme Shelter (awesome), One More Saturday Night and Brokedown Palace.
- As discussed last week, my sense is that when the dust settles on 2009, it'll look like Twin Bleaks. In other words, we've seen our first 20%+ plus rally of the year and I expect a stern downside test (perhaps towards the lows) before a second similar lift later this year. The near-term question remains whether we need to qualify that acne (above S&P 875) first.
- Driller? I don't even... nevermind. But please see the drillers, as measured by the OSX, as they try to break out through OSX 150. As past support is future resistance, that level will serve as initial support when the flu-induced crude supply hits the marketplace.
- I was trading the banks for the short side Friday-unsuccessfully, I might add-before flattening out into the weekend. Opportunity cost is the other side of discipline and there's no looking back as profitability lies in the ride ahead.
- Early eyes this morning will focus on Bank America (BAC) (socialist psychology proxy), Goldman (GS) (best in breed proxy), the pharmaceutical sector (perceptional safety play) and the master beta complex (Apple (AAPL), Google (GOOG), Research in Motion (RIMM), Amazon (AMZN)) as measures of risk tolerance/aversion.
- Good luck Minyans, and lets be careful out there.
In memory of our fallen friend and trusted colleague, Bennet Sedacca, 100% of the donations made to the RP Foundation through April will be channeled to philanthropic endeavors consistent with the RP mission, working closely with the Sedacca clan in the distribution of those funds. We thank you kindly for your support as we strive to effect positive change in the lives of children.
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 email@example.com.
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