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Monday Morning Quarterback: Social Studies


Some operating with "Ready, Fire, Aim!" mindset.


A fresh set of sessions is upon us, and with it our weekly ritual of trying to assimilate the wicked crosscurrents in an unsure world. As we begin this process anew, I wanted to share an instant-message exchange that took place Friday as we edged toward our requisite respite:

Toddo: Jeezums, just peeked at the message boards and it looks like I'll walk home with a limp again.
Pepe: It's not you.
Toddo: Oh, I know, people are peeved. Sorta ironic actually.
Pepe: Jon Stewart either opened the floodgate or provided a much needed catharsis. I hope it's the latter but I suspect it's the former.

Now, there's a reason I share this and it's not to illicit emails of support. Social mood and risk appetites shape financial markets, not the other way around. We've been monitoring this dynamic for a long time, highlighting societal acrimony as a central theme last year and introducing the extension to social unrest and geopolitical conflict this year.

To wit, the following three headlines all rolled across the tape in the span of one hour on Friday:

"Japan: May Shoot Down North Korea Rocket"

"U.S. Jet Shoots Down Iranian Drone Over Iraq"

"U.S. Warships Head For China Sea After Standoff"

It would be easy to dismiss these as isolated incidents, or say that markets are a leading indicator and much of this risk is discounted (with mainstay indices still down 50% from their highs, some of it surely is). While I remain open to further strength in the context of a bear market rally, I would remind ye faithful that excess breeds excess.

Indeed, perhaps the single most important word ever scribed in Minyanville was "cumulative," first uttered by John Succo. Perhaps nowhere is that better illustrated than in the chart I shared last week when I posed Answers I Really Wanna Know.

The question remains whether we've passed the point of no return, a place where the cancer is bigger than the economic patient. I hope not, but understand that hope isn't a viable investment vehicle. The best utility I can offer is to share my process and experience learned over the course of my 20-year career.

I will ask for 3 things in return:

The first is patience, for this will take some time.

The second is empathy, as the point of recognition permeates society.

The third is kindness; you never know how far a positive pebble will ripple in the pond of life.

If you can do that, we can do this - and this, my friends will forge the path through the wrath and deliver us on the other side of this prickly ride.

Full Disclosure

As reference above, I offered my take on the financial media turf wars last week and Pep weighed in on Friday. We've historically avoided this discussion as we pride ourselves on taking the high road. Still, folks who never heard of Minyanville accused us of exploiting the situation for purposes of publicity.

I would counter that if they had heard of Minyanville, they probably wouldn't be so angry in the first place and what occurred was endemic of a much broader -- and potentially telling --dynamic.

On The Daily Show, Jim Cramer, when asked about the responsibility of financial media, replied, "We all should have seen it more." I would humbly ask that he speak for himself. Indeed, if we've transgressed in the 'Ville, it's likely through the lens of not seeking enough publicity to draw attention to our views.

We've been warning of the cumulative structural imbalances building behind the scenes for many years. It was of no benefit to us to opine that we were entering "a prolonged period of socioeconomic malaise entirely more depressing than a recession" in 2006, but we did because it was true and because it needed to be said.

It's ironic the platform with cartoons got it right while those who were supposed to get it right acted like cartoons. The populous opinion is rarely a profitable one, particularly when the message isn't what people want to hear.

If something good come from all things bad, quite hopefully it's the realization that there is benevolence on Wall Street and there are organizations that take great pride and exert tremendous energy in being part of the solution.

We've long believed that if you do the right thing long enough, someone will eventually take notice. Somewhere, Howard Roark can most certainly relate.

Random Thoughts:

· Early last week, I offered that the upside trade was into Thursday's mark-to-market meeting. While they hinted at a shift, we got more posturing than clarity although I do expect to hear something on this front in the coming weeks.

· While I didn't participate in the rally as much as I would have liked, I've learned never to lament when making money or attempt to make up for lost opportunities. I enter today's session light and tight and in search of good set-ups, which we'll chew through in real-time on the Buzz & Banter.

· S&P 800 seems like the next level of intuitive resistance.

· Some serious snaps to a gutty and gritty Syracuse squad for leaving it all on the Garden floor. The 'Ville ( Louisville ) is a tough team and fitting champs in what I believe is the strongest conference in the history of college hoops. We will be hosting Minyan March Madness brackets again this year, so stay tuned for that.

· There were some good nuggets on Toddo TV last week lest you missed it.

· Ben Bernanke made a cameo on 60 Minutes yesterday, offering that the recession will end this year. While they're certainly tossing a lot at this monster, Minyans are encouraged to keep it in perspective.

· You can learn a lot just by watching, and the inability of Research in Motion (RIMM), Amazon (AMZN) and Baidu (BIDU) to meaningfully participate in the lift by the pre-market futures may portend supply. I'm not in either, but that's subject to change when the flickering ticks spring to life.

· If you're a mainstream American following the AIG (AIG) saga from afar, how can you not be rubbed the wrong way?

· Note the greenback, which is off a full percent in pre-market action. We've been talking about the Wishbone World for years -- also known as "asset class deflation vs. dollar devaluation" -- offering that a lower buck is a necessary precursor -- but no guarantor -- of higher asset classes. This picture speaks those 1000 words.

· As it stands, I'm slated to head west tomorrow night, but that trip is very much on the fence.

Have a great week, Minyans and remember that profitability begins within.


No positions in stocks mentioned.
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