Todd Harrison: Navigating the New Wolf of Wall Street
Times change but the story remains the same.
Like most people navigating the Wall Street machine in the early nineties, I knew of Stratton Oakmont.
I was pulling down $28,000/year at Morgan Stanley and would occasionally stumble across one of its brokers boasting about multiple six-figure compensation or a fancy new ride. Many of them were regular guys like me: kids from Long Island enamored by the cha-ching emanating from downtown Manhattan. Money is a powerful elixir when you're in your early 20s and saddled with expenses; it's enough to make some people do things they ordinarily wouldn't do.
There have been numerous movies about the financial industry but The Wolf of Wall Street, based on the true story of Jordan Belfort, founder of Stratton Oakmont, carries a bit more weight in my world. The wealth created in the Lake Success-based company, located five minutes from where I grew up, served as a tempting siren for those of us intent on forging a proper path; it seduced a number of people whom I would get to know after they had paid their dues to society.
Twenty-five years after millions of dollars were stolen from unsuspecting investors, Hollywood decided to glorify the heist. I suppose sex and drugs still sell, as does the fascination with money, which is apropos given the new chapter of American greed that crowded out The Age of Austerity, which arrived like a clap of thunder with the first phase of the financial crisis. But now, instead of young brokers with slicked-back hair, we have tenured central bankers with Ph.D.'s manipulating the market. Only time will tell if the damage will be as pervasive, or the story as sexy.
With 15 sessions left in 2013 and all-time highs in the market, you won't read much about how polluted the modern-day machination is. When the sheriff himself is determining the rule of law, there is little, if any, incentive to question the mechanism that got us here. Whereas it was once considered anathema to interfere with free-market capitalism, it is now par for the course; the central bank has assumed the role of intermediary in the marketplace, providing liquidity not as a buffer, but as a driver.
This is a subtle but important distinction, albeit one that won't be questioned unless -- or until -- it fails.
There is chatter that the BLS fudged the payroll data. This revelation will be as anticlimactic as when Hank Paulson admitted to the existence of the Invisible Hand.
One of my favorite strategies is to buy beaten-up stocks or sectors that are purged from funds into year-end; it worked with Blackberry (NASDAQ:BBRY) for a few years (I'm not touching it this year), and it could work for the Gold Miners ETF (NYSEARCA:GDX) into January, so long as gold hangs in there, which is no guarantee -- the technical pattern works to $1065.
I missed the opportunity to pick up Twitter (NYSE:TWTR) at my price, but I still want to pare that long exposure against short Facebook (NASDAQ:FB) exposure, if and when.
- It's been five years since I wrote about the potential for another currency to emerge -- but yet, I don't get the sense that Bitcoin is it.
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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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