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Random Thoughts: The Chasm Between Stocks and Commodities Continues to Widen


Do traditional metrics still work in the system formerly known as capitalism?

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

Who knows how long this will last; now we've come so far, so fast.
-- Don Henley

Greetings from MV East, where the recovery continues to continue. I actually ventured into NYC yesterday-the second time I've left my home since the operation-to take a meeting, and while I was completely exhausted by the time I returned, there was decidedly less drama this time, as opposed to what happened last week.

A few-OK, a number of-Minyanville readers have emailed, pinged, or otherwise reached out to ask, "Dude, where are you?" The answer is that I've been focusing on business development. Being laid up for three weeks is disruptive on a number of levels, including the content side, and I've been working on a bevy of deals that require attention, if only by phone (hey, you can only do what you're physically able to do!).

So, apologies on the sporadic MIA-ness; it's not what I would choose, but it's the hand I've been dealt and I'm playing it best I can. I will also share that my feel for the tape has been akin to a Foreigner song-I'm trading around a short bias, which is difficult in a vertical tape-so it's not like I'm holding back on stellar, insightful financial market observations. We often say, "When in doubt, sit it out, or trade in-between," and that's what I'm doing with regard to my recent foray of short exposure.

Now make no mistake-this may NOT be effective risk management. In fact, looking at my Ten Trading Commandments, I may well be in violation of three of them given my current posture ("discipline trumps conviction," "perception is reality in the marketplace," "don't let your bad trades turn into investments"). I could offer that my risk is defined, insofar that I'm using out-of-the-money options funded with year-to-date winnings, but that borders on post-rationalization of risk, which is a killer in this business.

Be that as it may, it's the truth and if nothing else, you'll always get the straight story in Minyanville.

Some Random Thoughts:
  • Did anyone really think that Big Ben would be hawkish? I'm reminded of the axiom, the first move is the false move after the FOMC.
  • Big Board Breadth, after smelling snazzy all session, has flipped the downside switch.
  • M&A activity upticked of late, be it Yahoo (NASDAQ:YHOO) in tech or Actavis (NYSE:ACT), in the specialty drug sector.
  • Banks are at levels last seen in 2008. Remember when their fate was entirely more uncertain? All the while, Goldman (NYSE:GS) and JPMorgan (NYSE:JPM) continue to be better bid. As go the piggies, so goes the poke.
  • The chasm between commodities and stocks, which has most certainly mattered in the past, remains on our radar.
  • Massive amounts of short covering, which removes a forward layer of demand, is again worthy of a mention. See this reported report, for it is an eye-opener.
  • Social mood vs. risk appetites, the haves vs. have nots, Main Street vs. Wall Street.
  • Do traditional metrics -- short covering, buying stampedes, etc -- work in the system formerly known as free-market capitalism?
  • Did anyone else catch the terrific NCAA Lacrosse Tournament games this past weekend?
  • Is "tapering" too easy of a downside catalyst? I mean, when is the last time they rang a bell at the top?
  • Yesterday, I took 50-1 odds (on our standard bet, $1) that the S&P (INDEXSP:.INX) will drop 10% by my birthday on June 23? It's for charity-The Ruby Peck Foundation for Children's Education-so don't you go calling the IRS on me! And, I never told my counter-party which year, so I have some "give."

Twitter: @todd_harrison

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