Random Thoughts: Goldman Sachs and Turnaround Tuesday
The reaction to news is more important than the news itself.
While this column is an after-the-fact account of those market eyes, we discussed this potential before it happened on our real-time Buzz & Banter. I’m not selling—but I will offer that we’ve added a slew of new talent to “the heartbeat of the ‘Ville” and I think you’ll dig it. How sure am I? There is a two week free trial if you don’t like what you see. Alas, I digress.
While earnings have come out fast and furious—note Big Blue (IBM) down 4% and Bank America (BAC) trading marginally higher—the fundamental metric continues to take a backseat to the structural evolution overseas. The IMF continues to prod the EU to ratify a leveraged eye-popper of a (perceived) solution this weekend, but smart money suggests that won't happen, and Angela Merkel did nothing to dispel that perception yesterday.
This continues to be a headline-driven market, where risk management must trump reward chasing. All the while, the psychological metric--social mood--continues to deteriorate, and I would be remiss if I didn't keep the potential ramifications of that front and center, for better or for worse. These are interesting times; we call that a phrase but the Chinese call it a curse.
Trade, and invest, accordingly.
"Making that bet is a wager on the ability of European leaders to hold hands, sing Kumbaya, and approach the crisis with a united front. Buzz words like 'Euro Bond' and 'Leveraged EFSF' are key to that effort, and it's that anticipation that's keeping a bid under the market (which is a forward-looking discounting mechanism)."
- S&P 1250 continues to offer a sexy siren for the Hoofy with expiration on tap this Friday. That's the bull case and yes, that can happen...although my sense (as discussed on the Buzz yesterday morning) is that the market will begin to price in the lack of resolution overseas, and that could (at the very least) cap rallies.
The last time the N's were this stretched over the S's, we offered that either the NASDAQ needed to come for sale or the S&P needed to outperform to the upside (the last resolution, as we know, was to the downside, with the N's meaningfully under-performing their big board brethren). The dichotomy is even more stretched now, so stay on your toes please.
- A picture may speak 1,000 words, but a song tells the story. I told a friend yesterday that the Raiders had talent but now they have a purpose. The same can be said for other spawning movements.
- Minyanville is psyched to announce we've added Mike Comeau (co-MO) as a full-time Buzz Editor, with some crossover skills to other arenas in the 'Ville. Minyans should already know him well but if you don't, no worries; you will.
- If you would like to gather with the Minyanville community at our signature soiree—and cut some rug for a great cause in the process—hightail it over to Festivus 2011 on December 2. It's for the kids!
- The dollar—which pulled back 4% (to support) during the two-week rally; funny how that happens—is getting it's groove on anew. Watch this proxy, but don't get all caught up in the "Golden Cross" (50-day through the 200-day) when other media outlets highlight it; we've long offered in the 'Ville that these signals, along with "Death Crosses" have no statistical significance.
- Apple (AAPL) has always been a market tell (due to it’s weighting in the NDX) but my sense is that it will increase as a market proxy into year-end. Keep it on ye radar, even if you don’t have a position.
Chatter abounds that Europe will implement some sorta naked CDS ban. This approach has already been discussed in the 'Ville on numerous occasions including but not limited to, The War on Capitalism.
"What if 'naked CDS' are banned, as we've long suspected might happen? The knee-jerk reaction would likely be a melt-up in the equity space, but we could then see 'counter-party contagion' given the $500 trillion dollars of notional derivatives tying the world together."
- The most interesting evolution (to me) is that moderate views are being held to task by both sides; and it's become pronounced by the day. In my view, radical stances—religious, political, social—is where we need to be very careful. Think of it as a football field, with the red zone on either end of the stadium is the danger zone.
- With gold down $40 and silver taking a 3% haircut, I will remind you that commodity volume typically precedes equity movement.
- Good luck Minyans, and we’ll see YOU over on the Buzz.
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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.
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