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Random Thoughts: A Historic Moment in Free-Market Capitalism

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The NYSE and ICE join forces in the battle for share.

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MINYANVILLE ORIGINAL

Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.

The bombshell this morning - wait, wrong vernacular albeit subconscious - the left-fielder today comes by way of the IntercontinentalExchange (NYSE:ICE) stepping up to buy the venerable NYSE Euronext (NYSE:NYX).

You might remember that Deutsche Bourse attempted to buy NYSE at the end of 2010 - I sure do - and regulators put the kibosh on that deal, consistent with our vibes at the time that isolationism and protectionism are the "other side" of globalization.

This deal speaks volumes about trading volumes, or lack thereof, and we'll likely see more consolidation in the space. We should also note that HFT (High Frequency Trading) is a massive driver of order flow and the emerging scrutiny of the black box world may have played a hand in this deal getting done.

Either way, I am happy to hear they'll keep the NYSE floor intact; while it's more of a museum than a business driver in the digital age (as evidenced by the fact that ARCA could have, and indeed initially planned to open trading during Hurricane Sandy while the floor remained closed), it remains the single-largest symbol of free-market capitalism and a very special place.

On a personal note, I would like to congratulate the folks at the NYSE and wish them all the very best in this new Exchange order; they have been staunch supporters of The Ruby Peck Foundation (full disclosure) and I'm lucky to call a few of them friends.

This is a historic moment; soak it in.

Random Thoughts:
  • While redundancy is a pet peeve of mine (along with loud chewers, arrogant people, and long lines), I would be remiss if I didn't again draw your attention to S&P 1435 and NDX 2700, which remain levels of lore for investors galore.
  • The bulls will offer that the longer the tape "hangs tough" in and around those levels, it is storing energy for an up-thrust (as it works off the overbought condition as a function of time rather than price).
  • The bears? Yeah, they're licking their chops as everyone gets bullish. They know the bar of expectation for a fiscal cliff resolution is being set higher with each uptick while commonality of interests on the Beltway is moving in the opposite direction.
  • Hands over ears, the tape feels like it wants to break out to the upside and the animal spirits want to party hardy with Santa Claus. So, you may be asking yourself well, how did I get here why am I not making a big bet on the breakout? There are a few potential answers:
    • Financial fatigue? Maybe, but I prefer to view it as preserving my hard-earned YTD gains.
    • Too busy? Not so much anymore; we've chewed through a slew of to-do's as we tie a bow on 2012, which is our tenth year of efforts on a massive mission.
    • The path of maximum frustration? Perhaps, as I've learned that when something seems so obvious, it often sets an "off-sides" trap. That may not matter now - it may wait until the technical types are "all in" - but perhaps it permeates when we arrive at T-3 days until year-end.
    • A deep breath? For sure; despite the cancellation of my honeymoon (for family health reasons and yes, they're on the road to recovery), I plan to unplug and step off the grid next week to spend some QT with my wife and the jewel that is Ruby Jett. The twins will be with their pops, and I've got the series box-set of 24 on tap; I just hope Jamie doesn't feel threatened by my bromance with Jack Bauer!
    • And yes, headline risk; as unlikely as most folks believe an impasse to be on the fiscal cliff front (hand raised; I've been of the view that they figure something out), there is the chance that DC throws Wall Street a curveball (which would be entirely consistent with the prevailing direction of social mood).
  • Shifting gears, I received a ton of feedback regarding my thoughts on gun control - and I will again say that I'm all for the constitutional right to bear arms, I just never understood the need for assault rifles that can spray bullets like Jackson Pollock sprayed paint. We aim to see both sides of every trade and some of the more thoughtful responses were:
    • Banning assault rifles will trigger an explosion in the black market.
    • Those who want them will find a way to get them anyway.
    • You can't argue for the legalization of cannabis (tax revenue, crime rate, jobs) and the banning of assault weapons without there being a semblance of conflict in your reasoning.
    • The countries that have the loosest gun laws have the fewest incidents; it's not a "gun thing," it's an "American" thing, and that's another topic altogether.
All worthy food for thought; there are two sides to this debate and perhaps I hadn't fully vetted my view before sharing it. That's the risk when writing in real-time, but I wanted to share this fare in the interest of balance. Where you stand, much like those who follow the markets, will largely be influenced by where you sit.

Watch gold -- and good luck today!

R.P.

Twitter: @todd_harrison

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Position in SPX.

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.

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