The storyteller makes no choice, soon you will not hear his voice; his job is to shed light and not to master.
-- Grateful Dead
July 1st -- the halfway point of the calendar year. For all the hemming, hawing back-and-forth -- which included a near-death experience for the tech market -- the mainstay averages held their own, thank you very much: The S&P 500 (INDEXSP:.INX) and Nasdaq (INDEXNASDAQ:.IXIC) notched 6% gains while the Dow Jones Industrial Average (INDEXDJX:.DJI) edged 2% higher.
Wall Street is a bottom-line industry; at the end of the day, week, month, quarter, and year, one's value is determined by gains minus losses. It's a pretty cut-and-dry world, even if the approaches and styles -- if not the entire DNA of the marketplace -- drastically shifted in the last decade.
Eat what you kill; you're only as good as your last trade; finance has always been Darwinian but perhaps, now, more than ever, it has become a matter of survival. All the while, volatility -- once widely viewed as an index of fear -- is near all-time lows as the S&P trades at an all-time high. On its face, times they are a-groovy.
Something is seething under the seemingly calm surface, however; we call it social mood, but it has many names. The devolution has been so pernicious and persistent that we've seemingly developed an ingrained defense mechanism against it, not unlike walking past a homeless man and pretending not to have loose change.
Plutocrats see it coming too, even if most prefer not to discuss or acknowledge it. And signs surround anyone who is aware enough to pay attention. Porsche (OTCMKTS:POAHF) reports its best June sales ever this morning while more than one-quarter of Americans live in poverty. It's a bifurcation we've been talking about for a decade -- the eradication of the middle class -- and no, this isn't a victory lap.
I used to discuss the difference between an economic recovery and a stock market rally and the chasm between perception and reality. None of that mattered -- it was a waste of time and a waste of breath as the tape powered higher; any modicum of caution was costly to performance. As a result, reward-chasing is back in vogue and risk management is considered a mug's game; it is the mirror image of March 2009.
We're in the midst of navigating our next steps as a company -- and yes, for me personally, as well. We are having several discussions -- a pivot back to Wall Street, an angle toward communications, an entertainment ancillary, something entirely new and different -- but the common denominator is that the world is about to become much angrier and that should be factored into forward decisions at some level.
That likely means something different to each of us, beyond the obvious "family first" philosophy that we all share. The trick to the trade -- and this is a biggie -- will be the ability to identify when to flip the switch from capital generation to wealth preservation.
The simple and somewhat sad fact is that the world is as the world is while the stock market is near all-time highs, and much like December 2006, the most profitable pivot will only be obvious with the benefit of hindsight.
- The S&P "bull case" price target that we fingered back in May is now two handles away (S&P 1975).
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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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