Social Mood: Measuring Frustration in the Stock Market
If this is social mood at all-time highs, do we want to see the turn?
I was an aggressive trader, who morphed into a trader that wrote, who turned into a writer that trades, who is now a writer sitting on his hands with minimal short-term risk.
The stock market has become a mug's game; an arena where the rules change mid-game in an attempt to protect an institution that long ago lost its way. Those making cake in this historic move will be quick to boo-hoo this perspective; where you stand is a function of where you sit.
I was recently asked if I thought the market could rally to S&P (INDEXSP:.INX) 2000; I replied, "They can take this thing wherever they want." My response was tongue-in-cheek, for at the end of the day, I don't believe the Federal Reserve can control interest rates indefinitely; and when it loses control, it will lose the confidence of the investing public, as well as the faith of sovereign holders of dollar-denominated debt.
These are not the sour grapes of adverse performance; while I didn’t trade up to my potential in 2013 -- which happens over the course of a 23-year career -- the return is relative. I own hard assets that appreciate with the rising tide of liquidity, and those gains take some of the sting out of missing swatches of the parabolic stock frolic. Or, at least that’s what I tell myself in lieu of sticking corks on the forks.
What strikes me of late is how binary the market opinions have become; there are bulls, bears, and very few voices in between. And the vitriolic tenor in response to variant views on platforms like Twitter (NYSE:TWTR) and Facebook (NASDAQ:FB) smacks of an underlying and pervasive frustration. It's not enough to be right or wrong; many feel the need to attack those who disagree with them, out loud and as a matter of public record.
I don't profess to know if this is "predictive" in any way; to be honest, it already lasted a lot longer than I thought it would. The pervasive tension, all-time highs notwithstanding, is perhaps a combination of performance anxiety juxtaposed with a ready-made platform to air grievances in real time. Whatever it is, it's a new frontier for the investing public; and as is often the case during transitional times, it may prove wise to exhibit patience as the perceived gold rush evolves.
The Here and Now
It’s a holiday week as ranks thin and skeletal crews step up to the plate. Having spent many years on buy- and sell-side trading desks, I will share that said ranks have visions of grandeur that this will be their Wally Pipp moment. That may be true, but equally true is that the heretofore absent Wally Pipps likely left explicit instructions not to blow their books up.
As such, the market (offered by sell-side desks to facilitate order flow) will be less liquid than we're used to, which sets the stage for an uptick in volatility (which is, by definition, the opposite of liquidity). With most folks expecting a snoozer through Thanksgiving -- the most likely outcome -- we should keep that dynamic in mind.
Some top-line vibes in no particular order:
- As go the piggies, so goes the poke -- and the piggies (read: financial stocks) have led the tape higher of late. Pulling back the aperture, however, we see that banks are notably lagging the broader market since the FOMC grand experiment began. I thought that was interesting, and wanted to share, per the chart below.
Big beta -- the Teslas (NASDAQ:TSLA), Netflixes (NASDAQ:NFLX), LinkedIns (NYSE:LNKD) and Chipoltes (NYSE:CMG) of the world -- are soft out of the Turnaround Tuesday gate, and they remain our best proxies for performance anxiety in this environment.
Tensions between Japan and China qualify as a "left field" catalyst as everyone focuses on tapering, earnings multiples, technical analysis, and performance anxiety into year-end. Of course, any anxiety would likely manifest in Asian markets first (with likely being the key word).
The Ruby Peck Foundation for Children's Education will donate 100% of net proceeds through year-end to Typhoon Haiyan disaster relief. We will also be offering Money for Nothing: Inside the Federal Reserve DVDs, with 20% benefiting said efforts, in short order. It's a killer documentary, and not just because I have a bit of a part in it.
Tomorrow I’ll be publishing my annual Giving Thanks column as we observe a moment of gratitude. If we’ve learned anything in our 13 online years together, it’s the difference between loss and loss. With Thanksgiving coming up, be good to others and better to yourself. At the end of our journey, those are the memories that matter most.
- 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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