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Monday Morning Quarterback: The Learning Curve


There's always a bull case and a bear case.


"Education consists mainly of what we have unlearned."
- Mark Twain

It's long been our contention that the friction between opinions is where true education lies. That was the genesis of Hoofy and Boo; there's always a bull case and bear case and the residual grist is what you read about in tomorrow's newspaper.

The other day, Snoop Tony Dwyer offered a thought-provoking take on de-leveraging and the attendant implications for the equity markets. Minyan Peter respectfully offered the "other side," one that hit home for a number of reasons.

We want to hear both views from these gentlemen; when it comes to the nuts and guts financial stuff, they're amongst the best in breed.

Snoop contacted me Friday with some follow-up vibes. Being John Malkovich, I'm compelled to share his fare with ye faithful. And I quote:

"There is no debate. We de-lever each recession and then, when comfy again, want more 'stuff.' Our society--and human nature--is based on the fear of losing what we have followed very quickly by the not getting what we want.

'They are all right--the bears are all right- this will end badly and there is too much debt. The problem for them is that we are on the bullish side of the bubble building process again. This is 2003 on steroids."

Where do I net out? I respect Tony's take -- which aligns with what the credit markets are telling us -- but continue to believe we've taken drugs to mask the symptoms rather than medicine to cure the disease. That doesn't mean stocks can't continue to rally, it simply means the socioeconomic malaise will manifest one-way or another.

Further, for hyperinflation to percolate -- a 25% probability through my lens -- we need to see legitimate end-demand. I'm not referring to government spending (which accounted for almost 80% of GDP during The Great Depression), I'm talking consumer need, the means to spend and, perhaps most importantly, the desire to do so. Social mood and risk appetites shape financial markets.

While sitting on a panel in Ojai in 2005, Tony, John Succo and I had a spirited discussion regarding the percolating imbalances in the marketplace. In what would become one of the classic quotes in Minyanville history, Tony said, "The sun is going to blow up one day but that doesn't mean it's a smart thing to bet on."

He was right-the markets continued higher for a spell-and we were right, the sun did, in fact, blow up. Now that we've seen a history relief rally, the question we must address is one of magnitude (of the move higher) and timing (before the next wave of this crisis arrives).

I'm not smart enough to answer those questions but I'm seasoned enough to see both sides and manage risk-rather than chase reward-as we together find our way.

I will simply say this, friends, after nearly 20 years of trading and ten years of writing, the world has become more curious by the day.

Speaking of both sides...

We don't "do" acrimony in the 'Ville and I pride myself on taking the high road. This, you know.

But as I listened to my former partner take victory laps on CNBC for his Bernanke rant-which while right, was hardly alone-I am compelled to remind ye faithful that there are two sides to every trade.

I don't claim to have the answers and that's sorta the point-there are no pundits-and this is your friendly Minyanville reminder to think for yourself; you're the one who will reap the rewards or suffer the consequences.

Our goal in the 'Ville is to provoke thought and effect positive change through financial understanding. We understand it's impossible to offer advice to a faceless audience as people have unique needs and distinct time horizons.

Financial literacy isn't a sound bite or a lightening round; it's a lifelong journey. Just because somebody shouts doesn't make his or her message more important.

When headlines like "Greatest Bull Market in History" and "Why it's Different This Time" litter the landscape, it's time to reflect on lessons learned. Again, that may prove true but I've seen this movie before and would be remiss if I didn't share my review.

No salt intended and if you're a Minyan, you probably already know this. If communicating my first-hand experience helps one person question the conventional wisdom that if it's on TV it must right, it is well worth the time this took to write.

Random Thoughts

  • Weird Stat of the Day? The DJIA closed 9-10-01 at 9605 and closed 9-11-09 at…9605.

  • We drew attention to the "tech to semis to the reaction to news" dynamic last week and we can add Friday's action in National Semi (NSM) and the continued lethargy in Texas Instruments (TXN) to that laundry list.

  • I would have loved to be a fly on the wall when Richard Seymour walked into the Raider locker room. Quite hopefully, disrespect will be an engine of motivation for my beloved silver and black.

  • Wouldn't this be like telling your girlfriend that it's alright if she dates other guys? It would also explain why gold has been en fuego and the dollar pretty in pink.

  • The potentially bullish reverse dandruff in gold will trigger if and when the yellow metal pops through 1035ish. The fatal flaw of technical analysis is that stocks (or gold, in this instance) is "better" higher and "worse" lower but it's worth a mention as we assimilate our four primary metrics.

  • I'll also note that the US official who told China to date around is named David Dollar. What would Wenda Yuan say about that?

  • One more difference between 2003 and 2009? Then, we were emerging from a technology crisis whereas now, we're "emerging" from a financial crisis. That's worth a mention in a derivative laced finance-based economy.

  • I'm keeping a loose grip on the handlebars as I ride out my recent market bet. A weekly close above NDX 1700 is intuitive risk definition for those looking for a semi-tight risk profile.

  • The down and dirty chapters of Memoirs are upon us. There are no secrets in the 'Ville, a fact that will become readily obvious in the weeks ahead.

  • If you're communications, travel, appointments, mail, and Internet are in a snarl-up between now and October 18th, it's not your fault, it's not your fault, it's not your fault

  • I'm starting to get a bit of the Twitter bug. I hope it's not some sort of allergy.

  • I often out-think myself (not hard to do) but the fact that everyone says everyone else is bearish may in fact be bearish if nobody is actually short.

  • Crude led us up; was the downside reversal on Friday a red flag?

  • "Hey Todd, Haven't seen you mention Mercury Retrograde. Mark your calendar for September 15th, it's a date with Destiny to use someone else's words. Saturn opposite Uranus. That's dead ahead next week. Last Saturn opposite Uranus dates were November 4th, 2008 and February 5, 2009. The Dow was down some 2000 points within a month both times. So, Big Time Turnaround Tuesday next week? We shall see. Best, Minyan Annette."

  • On the one hand, there's orderly debt destruction and eventual globalization. On the other, isolationism and protectionism, slicing up the world pie into just so many pieces.

  • Good luck this week, Minyans, and I'll see YOU on the Buzz.


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