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Random Thoughts: Will August Bring the Revenge of the Bears?


Vibes on gold, social mood, and cognitive biases.

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

It's Turnaround Tuesday in the City of Critters, which might explain the crimson hue in the mainstay averages as we edged out of the opening gate.

'Tis early, of course, and the price action of the tape has been nothing short of snazzy. As discussed in this space by Jeff Saut, Jeff Cooper, myself and others, the next month or so should tell the tale in terms of "the other side of policy," if in fact that is 2013 business.

As we get to November, and should the market emerge unscathed, performance anxiety could percolate in the last few months of the year as fund managers fight for their professional lives.

Late yesterday, I raced down to the NYSE to tape the closing bell with Liz Claman. While I learned a lot -- I'm an 18", not a 17.5" collar these days, for instance -- we covered a lot of ground, from the credibility of the ratings agencies to the socionomic landscape to the ever-changing DNA of his marketplace.

That video can be found here, and yes, the first thing I did this morning was 30 minutes on the bike. Hip replacements and six-pack abs don't make for intuitive bedfellows, which is why I opted for the "half-keg" belly.

Some top-line vibes as we power up this counter-trend pup:
  • "Fat, drunk, and stupid is no way to go through life, son," or so said Dean Wormer. Spending the summer waiting for each and every utterance from a Federal Reserve member who has no idea of what they're doing -- other than saying it's "data dependent" and "we shall see" -- is no way to meander through the market, either.
  • Gold is taking it on the chin today. Yesterday we highlighted the gold vs. S&P (INDEXSP:.INX) chart, offering that either gold should rally or stocks should fall, and that remains in place. There are many other factors, of course, but it's a piece of the puzzle after the falling dollar lifted all asset class boats (this used to be one of our favorite themes -- asset class deflation vs. dollar devaluation -- before Europe, and by extension the euro, imploded).
  • The tape broke S&P 1700 this morning, which matters through a psychological lens but pales in comparison to S&P 1675ish (the trend-line from last November). And watch the banks -- JPMorgan (NYSE:JPM), Goldman Sachs (NYSE:GS), Deutsche Bank (NYSE:DB), and Citigroup (NYSE:C) -- for as go the piggies, so goes the poke.
  • I continue to hold a smallish SPY December put position (the "snake eyes" bet that I've already written down to zero, although there is some optionality left in it). News is always best near tops and worst near bottoms; I don't know if that applies to today's tape, but it sure feels like folks remain long and complacent. Manage risk rather than chase reward, and try not to let an opinion get in the way of making money.
  • Easier said than done, given our individual cognitive biases, I know, but that is our mission should we choose to accept it.
  • I haven't been doing that much active trading thus far in August; between running a small business in a tough climate, mapping partnerships for the second half, executing projects on behalf of blue-chip clients, scripting production for a major bank, formulating the next iteration of Festivus (December 6!), continuing the persistent physical therapy regimen (following my April 30 hip replacement), and focusing on a family matter (everything is OK; it just requires my attention), it's been a stacked summer to say the least. And our twins return Sunday after a seven-week stint at sleep-away camp, which is something we're all looking forward to. I'll be coaching Gavin's football team again this year -- and this year, we're in pads! Keep your head on a swivel, kid.
  • Why all the tree-hugging personal stuff? Over the twelve-odd years we've been in Minyanville, we've adhered to a core belief system: "Work to live, don't live to work," "The purpose of the journey is the journey itself," and "Truth and trust are the foundational constructs of any successful endeavor." I absorbed many of these beliefs from my grandfather Ruby, and we try to practice them as often as possible.
  • At the end of the line, life is simply a reflection of the decisions we've made and the things we've learned.
  • Good luck, and thank you.

Twitter: @todd_harrison

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Position in SPY.
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