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Random Thoughts: What If I Missed the 100% Rally in the S&P?

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Profits reside in the ride ahead.

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We're an interactive global community with Minyans in some 229 countries and territories. Those individuals-you, really-have always been core to our mission of effecting positive change through financial understanding.

Yesterday, I received the following email for an Old School Minyan and I assume he's not the only person struggling with this question. I share our exchange (with his permission) for the benefit of the entire Minyanville family:

Toddo

So, what's been keeping me up at night? We agree that the headwinds from what will have to happen vis-a-vis the 'debt super-cycle' Maudlin explains so well in his book/posts as well as you on MV is the "other side of the storm." But what if it comes and the market yawns? To my credit I flipped out of condos in NYC and Miami in 2005 for a large gain seeing the R/E bubble and was all in cash in 2008. To my bad, failed to realize what the Fed can do and missed the bulk of the "easy double" off of 666. $%^&!

As I bide my time expecting the "second shoe to drop"-what if it does and there is-like the old adage of the tree in the forest-no one there to hear/care? What if it's already baked in? And thus, the new great secular bull with all the great wealth formation that would ensue after such events/slates wiped clean- starts not from S/P 700 [again] but 1400?

In other words, what if we don't have the "luxury" of going "all in" with our cash stash at once-again depressed levels, but being forced to do so at a much higher level? Can I do that? Will I be able to recognize that? Can I swallow my pride and buy in at levels twice as high when I failed to before in a meaningful way? Mind you not now-- [i think...] but whenever? Making things worse is the other great adage--when the last bear turns bullish... Yikes...

Was wondering if you had the same nagging feeling?


Minyan Mark
My response:

Mark,

I do think about that-how can you not?-but I'm not beating myself up over it, as negative energy is wasted energy. We're seemingly in sync in terms of how we covered up in front of the first phase of the financial crisis and then missed the grand slam, for lack of a better term, by not closing our eyes and riding the synthetic stimulus higher. The question, as you so aptly put it, is what now?

There is no blanket answer, unfortunately; where you stand is a function of where you sit. For me, having just committed to buying a new home-which is part 'need,' as our family of five wants to escape from New York City, and part speculation, as I believe we're much closer to a bottom than a top in real estate with a 10-year horizon-I've made a different kind of bet on the recovery, and it's one that will pay psychological dividends.

I will say this-in December 2011, when everyone and their sister were bearish, the writing was on the wall of worry. In here, following a 25% lift in the S&P, the momentum is begging you to climb aboard the Matador Express and indeed, we're still below the S&P 1360 price target we've been harping on. I'm left to wonder how much of the Greek debt deal is baked into these prices and through a broader lens, what successful austerity measures will do to global growth.

And then there's the question of the better-than-expected stateside economic reports, and what that will do to the specter of QE3, which is partly responsible for the parabolic frolic in financial assets. The better the numbers, the less likely we'll see another massive move by policymakers, particularly in an election year.

I'm reminded of a quote from our Minyans in the Mountains Conference in Ojai, circa 2006:

"The problem that comes from engaging in high risk behavior for which the consequences are absent, even if only temporarily, is that such high risk behavior begins to appear normal, and the entire scale of risk gets adjusted and pushed out."

The more things change, the more things stay the same-and in this case, those "things" are cumulative. I continue to see what you see but as our sage, wise fallen friend Bennet Sedacca used to say, "What the market knows isn't worth knowing."

Best of luck to you and yours,

Toddo

Random Thoughts:
  • Hoofy the Bull will argue that overbought conditions are worked off as a function of time or price, and if this is the best the bears can do, the alleviation of tomorrow's unknown (payroll data) should get the party re-started right. Boo, ever the bear, will point to the capitulation from his friends, and opine that we're due, at the very least, for a gut-check.
  • I'm conscious that the knee-jerk reactions to a Greek debt deal, if and when, will be to the upside. With that said, given the current field position, my sense is that a spike higher would provide a very favorable risk-reward to those looking to fade (read: sell) that move.
  • There hasn't been much press surrounding the NYSE (NYX)-Deutsche Bourse deal that was nixed by European regulators. I'm left to wonder how much of this was concern surrounding anti-trust and how much was a function of the emerging isolationism and protectionism.
  • "Just wanted to give you a heads up on the NASDAQ resistance at 2860-2870; it's absolutely unreal how many lines come together in that area. 2860 is the 2007 high, 2860 is the 2011-2012 trendline, 2870 is the top of the head and shoulders top channel, 2870 is the 2011 closing high" -- Minyan "Lt." Dan
  • Inflation in things you need, deflation in things you want. Rinse and repeat, until the cycle breaks.
  • Is anyone else jacked to see Hoofy and Boo come back to life?
  • Will Apple (AAPL) fill the gap to $427, from where it broke out?
  • What's the path of maximum frustration from here?
  • Enjoy your weekend Minyans, you've most certainly earned it!
R.P.

Twitter: @todd_harrison

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Position in SPX, NDX

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 todd@minyanville.com.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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