Seems Like Old Times!
Using history as a market guide.
The more things change, the more they stay the same. Such is life, and so it is for the markets as well.
I’ve been trading almost twenty years, through Orange County derivative disasters, Asian contagions, dot.com crashes, crude bubbles, Great Recessions, lost fortunes, and synthetic rebirthings. See The Upside of Anger.
I’ve enjoyed periods when I’ve seen the seams on twisting curveballs and withstood stretches when I couldn’t hit the side of a barn. Yes, it’s safe to say I’ve weathered many financial climates, some of which I wouldn’t believe if I hadn’t experienced them firsthand.
When I sat down to scribe today’s vibe, I weighed several topics. There’s the bull market in corporate credit and the equity outlook for the rest of the year, but we touched on that in a recent missive, Ten Reasons Why This is Not a New Bull Market.
There’s the sovereign sequel to our financial crisis evolving overseas, but we had that discussion a few weeks ago. See also A Five-Step Guide to Contagion.
Indeed, there are slew of percolating concerns vying for our collective attention -- from eye-popping debt to geopolitical fret -- but nobody wants to hear about them while the screens are green. The market action speaks louder than words; and while the tape is seemingly setting up for a reality check -- S&P 1200 is resistance and volatility levels suggest earnings could be sold -- the rush to risk embodies the migration from fear to greed.
In many ways, we’ve seen this movie before; variant iterations of lessons once learned. We call this phenomena vu déjà in Minyanville, a strange sensation that we’ve lived this script but nobody remembers how it ends. From the turn of the century to current conventional wisdom, the story remains the same but the names have changed to misdirect the innocent.
Back then, globalization was justification for growth. Today, seeds of protectionism continue to sow.
Back then, the masses traded on margin. Today, there is cumulative credit.
Back then, folks flocked to day-trading firms and flipped condos; today, underwater mortgages provide license for strategic defaults.
Back then, politicians targeted corporate America and reactively took aim at lending practices. Today, angry mobs are taking matters into their own hands.
Back then, supply and demand shaped the tape. Today, a Financial Accounting Standards Board could single-handedly sink the system.
Back then, we had the Greenspan put. Today, we have the Bernanke helicopter.
Back then, Dan Dorfman moved markets. Today, everyone has an opinion -- and they’re tweeting it in real-time.
Back then, corporate malfeasance was the root of rage. Today, hedge funds are perceived to be an acceptable casualty of war.
Back then, we had venture capitalism and private equity. Today, we have an alphabet soup of government-sponsored acronyms.
Back then, we rationalized dot.com valuations. Today, we rationalize debt levels and push the bar tab to our children.
Back then, Nobel Prize winners were held to task. Today, Goldman Sachs (GS) is in the populist crosshairs and politicians are fielding death threats
Back then, society succumbed to the sexy sirens of Wall Street wealth. Today, there’s a rush to disassociate from all things financial.
Back then, the FOMC walked the tightrope. Today, they’re fitting a noose.
Back then, the bears were scared. Today, they’re hibernating.
Back then, we had a financed-based economy. Today, we have a finance-dependent economy.
Back then, many were looking for a better job. Today, almost one-in-five is underemployed.
Back then, Gordon Gekko was a financial icon. Today, he’s coming soon to a theater near you.
Back then, we saw a fear of missing. Today, there is just plain fear.
There are numerous threads between the decades but perhaps the truest extension is one of longing. After bubbles and busts and synthetic booms still, regardless of price and no matter the time, nobody seems to be where they wish or have what they want. Some feel cheated; many are forlorn.
The irony of our current quest is that those who preserved capital and saved for the future were punished by fiscal and monetary policy; the stock market, once a proxy of innovation, morphed into a matter of national security. In the process, we’ve lost more than our innocence, we’ve lost our way.
Perhaps twisted manipulation has existed since the beginning of time and I'm late to the game in noting it now. But as someone who has lived on both sides of the tracks, I can relate to the indifference of deep pockets and empathize with those forced to make difficult decisions. See Memoirs of a Minyan.
Ironically, both ends of our societal spectrum share a common characteristic; they pine for a bigger piece of the American pie, with the have-nots aspiring to be haves and the haves always wanting to have more. It’s no longer a question of relative standing, however; for many, it’s a matter of financial survival.
Yes, the more things change, the more they stay the same but this time, battle lines are being drawn and patience is wearing thin. As social mood shapes financial markets and society is a sum of the parts, we must respect this seemingly amorphous dynamic as we together find our way.
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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