Random Thoughts: Debt, Spain, and Labor Pains
Investors fire up for a fresh five-session set.
Following a weekend that was chock full of children-soccer, football, baseball, bowling, arcades, parties and play dates-I managed to squirrel away for three hours on Sunday to watch my beloved Raiders take on the Vikings.
It wasn't pretty but in the immortal words of Al Davis, they managed to "Just Win, Baby" and remain in first place in the AFC West for one more week. There are few things in life that are "innocent fun" anymore; I, for one, am thankful that football is one of them.
As I transitioned my family back home, reminding myself that the Silver & Black hasn't been in first place this late in the season in almost a decade, I checked the Bloomberg App on my iPhone. My smile quickly faded and a nose-scrunch emerged.
The super committee was already debating how to deliver news of their failure (hint: you already did). This should lead to another U.S Debt Downgrade and perhaps more importantly, downtick the already fragile psychology surrounding the government's ability to work together for the greater good.
Speaking of which, Spain became the fifth European government to cave to the debt crisis, following Italy, Greece, Ireland and Portugal. As I offered last week, while everyone is focused on what will happen if Europe fails to adopt the austerity measures and tax hikes, I'll ask you to ponder what will happen if they succeed.
And we've still got the MF Global (MFGLQ.PK) overhang adding a layer of uncertainty to a global market in dire need of credibility, not to mention the full faith and credit of our custodians and counter-parties.
Sprinkling in some saucy social mood-from Occupy Wall Street to bomb plots in NYC-and here we are, days away from a holiday designed to remind us of how thankful we are-and trust me, despite everything I've listed and many things I haven't, we each have a LOT to be thankful for as we fire up this pup for a fresh five-session set.
A few random thoughts as we ready to rock and roll:
It was expiration on Friday, so expect some "hangover" for the first few hours today before a truer tone emerges.
SEE the (potentially bearish) head and shoulders formation in the German DAX, which we've superimposed with the S&P. This "works" to DAX 5000 through a pure technical lens, so file that in the back of your crowded keppe.
S&P 1180-1200 should provide some technical support, if and when, as global markets point lower to start the week. BKX 40 remains resistance to the upside.
We saw a lot of commodity volatility last week and that typically precedes equity movement; keep that in mind as the holiday-thinned skeletal crews step on the field.
Through a pure fundamental lens (S&P earnings up roughly 20% year over year), there is a view emerging that the US is the best house in a tough global neighborhood.
That could lead to relative outperformance, but as I offered on Bloomberg late Friday, the myth of decoupling is just that-a myth-in a finance-based global economy. There is too much leverage, too much interconnectedness and too many derivatives tying the world together.
I do believe the "medicine" is debt destruction, and through that lens I'm encouraged that we're seeing that starting to be administered (Greece). The trillion-dollar question, of course, is how that will manifest up and down the financial food chain (orderly or disorderly).
Let's please remember that with year-end in sight, performance anxiety continues to percolate and if the market could magically find a bid, the buyers are likely higher.
You've heard Professor Fil Zucchi share his views on the forward state of Italy; here's the other side of that trade.
- Where there's smoke (Jefferies (JEF)) or fire (MF Global)-Johnny Cass has been all of this-one thing is for certain; there's a lot more we've yet to see.
Discipline over conviction, good traders know how to make money and great traders know how to take a loss, don't turn your back on this tape for a second....all part of the same stylistic approach of risk management over reward chasing or worse, rationalization.
It feels like there is a lot of fatigue floating around-trading fatigue, social fatigue, political fatigue and of course, my favorite, fatigue fatigue.
Eurobonds = Sharp Year-End Rally. The question is, does Santa deliver them to the bulls?
If you ask me for a skew, I'll say lower-for reasons we've discussed-but the path of maximum frustration is chock full of detours, and we know that performance anxiety likely means that the buyers are higher.
- Festivus is a week from Friday--be there or be...missed!
- Good luck today!
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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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