Freaky Friday Potpourri
Something new and different has emerged, a high stakes game of chicken between perception and reality.
All right, here's the situation
My instincts went away on a week's vacation.
(DJ Jazzy Boo)
Good morning and welcome back to the flickering pack. It's been a nutty month in the city of critters as earnings, expiration and upside energy combined to provide the perfect storm. Indeed, since the March lows, the S&P has tacked on a quick 10%, leaving sub-prime, geopolitical and emerging market concerns in her wake. In the process, it also left alotta bears feeling mighty silly for having the audacity to question the buy high and sell higher mentality.
You can't blame Hoofy for feeling a bit brazen. With Amazon tacking on 35% this week and Baidu.com popping 30% overnight, we're left to wonder whether an echo, echo, echo bubble might be upon us. Through a macro lens, we understand that the 30% drop in the dollar since 2002 has mirrored the 30% gain in the S&P. But something new and different has emerged, a high stakes game of chicken between perception and reality.
And trading, as we know, is the process of capturing the disconnect between that foul standoff.
While earnings are coming in largely better than expected (currency gains, cost cutting and financing operations notwithstanding), this morning's tepid GDP brings us back to a concept coined long ago in the 'Ville. It's called Stagflation*, which is to say that the end product remains the same but historical precedence need not apply. Why? While the masses of "have nots" continue to grow and sow seeds of discontent, economic data has been skewed by the slimming yet swimming sliver of "haves."
The net result is that most folks don't feel like we're living at "all-time highs" as they try to keep up with the Dow Joneses.
The Minyan whisper is this market has a contagion. The inoculation lasts how long? Cooperate EPS with shrinking floats, ultra-conservative guidance, it 'feels' like stronger growth. The Fed is in Goldilocks' bed, Hank Paulson has his plunge protection team and this country NEEDS a loud booming market to shout back at all the trivial concerns of reality. This could last a very long time. Nobody can possibly predict the end to this levitation. The markets cannot take the rationality of gravity. (I see nothing but blue skies). The problem I have is going long anything and logging into Minyanville. The hue of your view brings out my year 2000 yellow card. Maybe that speaks to my sophistication as a trader. Capital glut, the incessant bid under market…still, I enjoy your site. Help me with this dichotomy. I so wanna be a Minyan.
I was talking with Professor Succo recently and we were discussing the dollar. When I noted the stat above-that the dollar loss mirrored the S&P gain the last five years-he quickly noted that the greenback has lost 90% of its value since the turn of last century. 90%. That lended perspective in a hurry, which is to say that the world has been 'rebalancing' for a mighty long time. I offer this fact to highlight the context of time. Yes, this could last longer. It's possible. It's within the spectrum of potential outcomes. We all agree on that.
The "Minyan whisper" you refer to isn't a steady drumbeat of coming contagion. It's simply the acknowledgment that the conditional elements necessary for such are higher than most people would likely assign. Further, the pressure and compression currently in place are cumulative, which is an important yet seldom discussed point. Income funds (over-writers) continue to sell premium and the negative gamma is building. That could eventually have a profound effect in a finance based, derivative laden, debt-dependent, adjustable rate, globalized economy.
Minyanville strives to provoke, not shape, thought. We wanna paint both sides of the ride, which isn't always a popular bent when the screens are green. But remember, Skinny, the Wall Street machine and the mainstream media gets paid when you play and there are plenty of agendas in place to keep you doing just that. We're not trying to be difficult, contrarian or abrasive. We're simply being forthright and intelligent in our assimilation, which is sometimes right, sometimes wrong but always honest.
- Keep an eye on Apple, which is giving back some of the post-earnings circle smirk and slipping into the gap (which "works" to $95).
- The dollar, which picked up its keppe yesterday, is getting whack-a-moled back down this morning. You know the levels and I hope, by now, you understand the implications (both ways). If we break these two supports, Hoofy has a shot at higher equity prices. If Snapper runs the buck, all bets are off for asset classes en masse.
- While the jig in the financials led us off the lows, they remain in "non-confirmation' mode and below resistance at BKX 118.
- The Yen is heading for the longest weekly losing streak against the Euro in five years as the Bank of Japan signaled it may refrain from raising interest rates in coming months.
- Someone was on financial television this morning offering that there is more risk to being out of the market than there is being in the market. That sorta sums up the collective mindset at present and officially qualifies as a red flag.
- I'm off like a prom dress tomorrow for a sneaky week away from this freak. There was a time in my career that I beat myself up for taking off but no mas. If we're to work to live-rather than live to work-we gotta learn to let it go. I'm a bit of a hypocrite but hey, it's a work in motion. As are most things.
The Important Stuff
- On Tuesday, May 1st, there will be an uber-fun event at the Stone Rose in NYC to benefit those affected by the tragedy at Virginia Tech. Minyans are welcome in size but ya gotta RSVP in advance. Tickets are $50 each and there will be free food and drink for those who enjoy that sorta stuff.
- On Wednesday, May 23, please join your fellow Minyans and members of the 1980 US Gold Medal Hockey Team for the Miracle in Manhattan. The Ruby Peck Foundation for Children's Education will be one of the beneficiaries and MVHQ will be there in force. Please, thank you and all that other good stuff!
Join us for a "Miracle in Midtown"
Wednesday May 23rd... benefiting charities including the Ruby Peck Foundation for Children's Education
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