What Osama Bin Laden Means for the Markets
News from abroad captures Wall Street's imagination.
Osama bin Laden was reportedly killed in a firefight with US forces in Pakistan on Sunday, officially ending a man-hunt that’s lasted almost a full decade.
The events of September 11 are seared into the memory of Americans, and they set in motion a series of events that changed world history. For my part, that day forever changed my life; part of me died that morning, while another -- and the genesis of this community -- was born.
The news sparked a plethora of emotions across the societal spectrum -- television stations, national newspapers, and social networks were ripe with pride, joy, and, in many cases, venom and redemption. It seems that for many, this news served as tangible closure, an overdue demonstration that nobody messes with the USA.
I pride myself on my honesty, and that is both a blessing and a curse. As it pertains to the fate of Osama bin Laden, I’ve long operated under the assumption that he was already dead, and that information was withheld as a function of national security.
Conspiracy you say? If there was credible intelligence that his death would trigger sleeper cells within our borders, that theory suddenly becomes palatable. And his burial at sea does nothing to dispel that notion, although it doesn’t prove it either.
I share this for several reasons, none of which will earn me popularity points or perceived credibility. They’re listed in no particular order, other than they’re all chewing through my mind-share on this fine Monday morning:
- I’m reminded of my friend Bill Meehan and the rest of the innocent souls who needlessly perished that day. Your memories will never be forgotten, with or without the perceived demise of the alleged mastermind, and we should take this opportunity to look downtown and pay our respects.
- There will be unintended consequences, just as there have been following the “solution” to our financial crisis. I won’t list them, or again draw the distinction between a rally and a recovery, or the have’s and have not’s, or medicine that cures the disease vs. drugs that mask the symptoms, but you get the drift.
- That hopefully doesn’t take the form of retaliation attacks or awoken sleeper cells, although the State Department has warned Americans worldwide of “enhanced potential for anti-American violence.” It could, however, lead to further tensions with Pakistan -- where Bin laden supposedly hid 75 miles north of the capital -- or stoke further anti-American rhetoric in an already unstable region.
- Last month, Wikileaks revealed in some documents that al Qaeda's senior leader, Khalid Sheikh Mohammed, who was detained and interrogated, indicated that the terrorist group had hidden a nuclear bomb in Europe and that it would be detonated -- there would be a "nuclear hellstorm" -- if Osama bin Laden was captured and killed, according to International Business Times.
- While appearing on America Now with Larry Kudlow and Jim Cramer at the end of 2001, I was asked what the market reaction would be if we caught or killed Bin Laden. I offered then that we could see “the Bin Laden fade trade,” or a massive spike higher followed by a sharp move lower as folks figured out that there were no “one shot” solution to the newly intricate world.
- Ten years later, we’ve received that news having already experienced a massive spike (100% in two years) and on the heels of one of the more widely-embraced breakouts in recent memory (above S&P 1345, and most technical analysts expect it will last until S&P 1430). So, for the record, what I said then doesn’t apply now as a function of our field position.
- Patriotism is not an actionable catalyst and emotions are best left for weddings and funerals. There are a slew of cross-currents -- earnings, artificial stimuli, technical herding, overt complacency (VXO, II bears), sovereign posturing -- so keep your eyes wide open and your right hand up.
- Commodities should offer some clues today, as the intuitive knee-jerk reaction is to move away from those perceived safety plays. Please remember they’ve been beneficiaries of a few dynamics -- geopolitical strife and fiat currency devaluation hedges among them -- and old habits die hard. While they’ve been best in breed performance wise, I don’t foresee them as ultimate hiding spots when the dust is allowed to settle.
- I’ll end with the disclosure that I’m still playing silver from the short-side, in a trade that garnered a lot more attention than I intended or expected. I’ve been selling blips and buying dips and that stylistic approach will continue today. While my entry level was lower (I’m always early) the insane volatility has already allowed for a few profitable round trips; no back-slaps here, just sharing the process for better and for worse.
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 email@example.com.
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