Revisiting a Year of Change
Looking back and peering forward.
I remember my mindset one year ago today; following week after week and month after month of unbelievable stress -- after navigating the Bear Stearns (JPM) scare, the bearded nationalization of Fannie Mae (FNM) and Freddie Mac (FRE), the collapse of Lehman Brothers, the implosion of AIG (AIG) and Washington Mutual, Martial Law for the Markets and awaking thereafter Back in the U.S.S.A. -- I had almost reached the end of my rope.
Recovering from my third knee surgery late August the prior year, immediately preceding that September to remember, I was supposed to attend physical therapy at least twice a week. That had to wait, as did most other pleasantries such as friends and family. When the financial crisis hit -- despite "seeing it" far in advance and warning Minyans of what was to come -- there was no time for such seemingly silly self-indulgence. The world was crashing, and it would continue to do so for another six months.
I limped into MVHQ on March 6, 2009, took a deep breath and summoned the energy to continue our quest to effect positive change through financial understanding. What was once a cutesy tag line for a fledging enterprise emerged as the battle cry for society itself; it was war and as we wrote at the time in the heat of battle, war was hell.
I wrote about the struggle. Despite the incessant pressure and continued degradation, I was trading from the long side, accumulating upside exposure as a function of price. I told myself that "I was stopped out against Armageddon," that if those price levels didn't hold, my P&L would be the least of my -- or any of our -- problems.
The prior afternoon, between dizzying arrays of e-mails, incessant information assimilation and vicious, consuming price action, my head began to spin. I got up, went downstairs and walked around the block. As I wrote in real-time:
"Interestingly enough, the sun was shining and people were alive. Heck, some of them were even smiling. I took a deep breath, looked up at Ruby and gave him a wink. He's the moral mentor who taught me that no matter how bad things get, even at the darkest hour, this too shall pass."
There was no way to know that the first phase of the financial crisis would pass -- that day. There was also no way of knowing that a few weeks later, our community would lose one of our best and brightest with the passing of our brother, Bennet Sedacca.
Yes, it's been some year; we witnessed historic intervention, massive stimuli and perhaps the greatest bear market rally in the history of mankind. And what were once sour grapes and sullen strides have evolved into upbeat optimism and bullish buoyancy. We've very much come full circle, or some derivation thereof.
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At the end of the column I wrote one year ago today, I answered a Mailbag from someone who was clearly feeling the stress. I share it anew, not to rub salt -- that's never been our style in good times or bad -- but for purposes of perspective. For my part, I remember how incredibly dire it felt at the time and how difficult it was to assume a contrarian stance.
Minyan Mailbag, March 6 2009
I heard you on Yahoo! Tech Ticker, saying you are making bets on a big rally going into March. I've been expecting the S&P to drop to 660 all along and expected a big drop going into Q1 earnings.
You have long positions, I have short positions. And I have to say it's a bit frustrating to see so many headlines from Minyanville suggesting that there will be a rally or that the bears have run out of steam.
It's one thing to make a bet, and it's another thing to attempt to manipulate the markets with clout in an attempt to be right and make money.
Your articles may have no influence, but please, let the markets run their course.
My response was as follows:
My response was as follows:
My friend, please click through the links in this article. Sometimes right, sometimes wrong, always honest.
We (at Minyanville) were very bearish for a long time. If you read, watched or listened to the tech ticker piece in it's entirety, it spoke of a looming binary event. While my gut was higher, the stylistic approach was trailing stops (which made money on that initial pop).
I put it out there, all day, every day and always with the caveat that this is what I'm doing -- for better or for worse -- and that it's not advice (I don't know the risk profile or time horizon of my audience). I've never been accused of attempting to manipulate markets (all I have is my name and word) and please, let's be clear, nobody is bigger than the market, most certainly not me.
Alas, March ain't over yet, my friend. Stay tuned.
The popular opinion is rarely the profitable one, as we learned that day and many others. We must respect the two-sided animal spirits in the marketplace, as well as the coordinated agenda of global central banks to avoid the second phase of financial malaise. They're "all in," but that's both a blessing and a curse.
Perception is reality and the tape is the world's largest thermometer, but make no mistake that nobody -- and I mean nobody -- is bigger than the market, at least for a prolonged period of time. In other words, enjoy the rally respite while it lasts and take it for what it's worth but keep your right hand up and your mind wide open.
Just as a rally seemed foreign 365 days ago, so too does the specter of sustained selling given the recent technical breakout, fundamental improvements and the prevalent psychology. That doesn't mean we can't see further liftage, mind you; it simply means we should remember that left fielders rarely enjoy a spotlight until after they've stolen the show.
While attending the Eastern Family Economics and Resource Management Association (EFERMA) conference last week in Chattanooga -- a fantastic collection of thought-leaders that included members of the President's Advisory Council on Financial Literacy and several representatives from The Federal Reserve -- we spoke about preparing for the future through the lens of earning, spending, saving and giving.
It's familiar fare for our community; we teach it to our kids in Minyanland and we share it with ye faithful through a variety of forums. As we're apt to say, the skill-set necessary for proactive financial intelligence isn't a snapshot or a lightening round, it's a lifelong, dynamic process that has become a societal need rather than a particular want.
As we look back at the year that was and prepare ourselves for what's to come, we'll likely find that the more things change, the more they stay the same.
Good luck today.
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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