The Short-Sale of American Icons
Social mood will play a major part in this market movie.
There are certainly two sides to the current equation. The bulls will point to an upside window for equities given the strength in corporate credit, performance anxiety into year-end, and the most recent correction. The bears will counter that the improvement in market fundamentals was discounted by the 100% lift off the 2009 low in a rally induced with drugs that masked the symptoms rather than medicine that cured the disease.
Given financial markets have morphed into a matter of national security, we must respect the motivated agendas of central bankers around the world. As the German Chancellor declared war on speculators and the Greek government hinted at legal recourse against stateside financial institutions, we would be wise to respect the unexpected and appreciate the unintended consequences that may follow. (See: The War on Capitalism.)
There are alternative scenarios: On one side, debt destruction, asset class deflation, and an outside-in globalization once the dust settles. On the other, we continue to give the global drunk another drink with hopes he doesn't sober up. The inevitable truth is that he one day will and our children will be forced to pick up the bar tab if we don't change our ways, and soon.
As we together find our way, the price action will serve as the ultimate arbiter of variant views, and the friction between opinions will shape the tape. That's why it's important to understand the crosscurrents, respect the catalysts, and employ discipline over conviction during each and every step. (See: The Ten Trading Commandments.)
There's no shame in admitting it's hard; there's only shame in pretending it's not. As we edge though this age of austerity, navigate the increasingly complex societal structure, and find our way to better days, I will simply offer that those who aspire to the lifestyles of the rich and famous should be careful for what they wish.
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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 firstname.lastname@example.org.
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