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The State of Our State of the Union


Looking for answers among the questions.


The State of the Union came and went with mixed emotions on many fronts. From 40,000 feet, one could argue President Obama's mandate is spot on; jobs are the primary focus and small business, the fabric of our great nation, must be encouraged if we're to rebuild our economy from the inside out. There is a ton of motivated human capital working towards a solution; they (we) must be encouraged, not repressed.

(See Todd's take of Obama's 2011 State of the Union address.)

While the broad strokes are there, it remains to be seen if politicians will be able to color within the lines. The last few years have been The Great Divide, red states vs. blue states, have's vs. have not's, Main Street vs. Wall Street. The President was correct in saying that we must work together to execute solutions but that's easier said than done in an election year when personal and political agendas abound.

To that end--with a conscious nod that we don't "do" politics in the 'Ville unless it relates to financial markets -- I'll share this thought. Into the Presidential election, I said the vote came down to "diplomacy vs. defense;" that the enormity of the economic hardship embedded in the system after years of cumulative growth was bigger than any one man.

I half-jokingly offered that, with a forward-looking lens, the Republicans should vote for Obama and the Democrats for McCain. "Someone will have to fall on this economic sword," I wrote at the time, "and we should be prepared for push-back regardless of who wins."

That push-back is here, there and everywhere. As Pepe Depew so eloquently wrote yesterday, the mainstream mindset has embraced a "whatever it is, I'm against it" attitude I touched on that dynamic in "Fear and Loathing on Wall Street," asking folks to take a step back so we can identify positive pathways rather than wallow in the why. The vitriolic feedback (outside the 'Ville) encapsulated the anger and resentment percolating throughout our country.

Listen, I've made no bones about my deep rooted big picture concerns. I may be early on some of the themes but again, they're ever-present and cumulative; they won't magically disappear, they must be solved rather than masked. I understand there are those out there who disagree with me and that's alright; in fact, I love to hear the "other side" of any debate as the friction between opinions is where true education lies.

I will say this, however. Despite various instances (energy and metals from 2003-2007, equities at various times and price levels), I've been cautious for the last few years -- some would say, "entirely too cautious." I have trouble reconciling that perception -- the last decade was the worst financial performance in history -- but I understand human tendency often migrates towards positive, and often self-serving, outcomes on the probability spectrum.

If you asked me straight-forward and off-the-record, I would tell you this depressing recession has been in play for ten years, masked by the lower dollar and skewed by the spending habits of a slimming margin of society. It began when we didn't take our medicine following the technology crash and the word "recession" was considered anathema. This current iteration of the financial crisis is simply an extension of that; while the eye of the storm may have passed, we still have half of a tornado to sift through.

Professor Smita recently sent me the article I wrote on on my first anniversary there; it spoke of the journey we take vs. the destination we arrive at, as well as the "long, hard road" that would come to define both the financial markets and those who hung their hats on Wall Street. Much as that's proved true -- and understanding we've got a ways to go -- we needed to go through it to get through it.

The fact that we're going through it is on the margin positive despite the deep-rooted mainstream pain, which is an inevitable consequence of our societal largess. That, of course, doesn't mean everyone has transgressed -- the vicious irony of this all is that the savers, the ones who did the right thing, have been punished by policymakers -- but it also doesn't mean an "every man for himself" mindset will solve our problems.

I'm a buyer of dreams and a seller of screams. I'm tired of the acrimony and enthused by the specter of change; true change. We often say that society is a sum of the parts. It stands to reason that if everyone is depressed, we'll be in a Depression. If folks can rally, persevere and prosper -- by their own hand, if necessary -- we'll eventually turn this corner, enjoy the journey and leave a better world for our children.

Yes, in many ways I'm too bearish. But in others, I may be the biggest bull in the room.

Random Thoughts

  • If you turned this chart of the S&P upside down, would it be a bullish cup-and-handle formation? Either way, S&P 1080ish looms large; we've spoken about if for weeks (months) and alotta technical types have it in their sites. Hoofy will try to defend it but if and when it breaks, there will be a "sell stop vacuum" underneath.

  • Please remember to put price limits on your orders to avoid any unpleasant surprises.

  • Active bears may choose to roll "buy stops" to the other side of S&P 1105. For those with a bigger risk appetite, S&P 1120 and S&P 1150 are the levels upstairs.

  • The most bullish thing on my screen? Select financials trade dry, such as Goldman (GS), Wells Fargo (WFC), JP Morgan (JPM), Citigroup (C), and Bank America (BAC). We tossed a Buzz out there into the bell sharing that we picked up chatter that the President would take a softer stance relative to recent rants. He did, and they're reflecting that in early morning trade.

  • When in doubt, trade "in between" I'm doing that through some "initial pickage" on my S&P gamma, while maintaining my broader bias in the context of the aforementioned resistance levels.

  • Finally -- and most importantly -- see some old friends; it's always good for the soul.

Good luck today.


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