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Random Thoughts: The Germans Get the Heisman From the G-20


What the global wrangling means for the market.

We offered on Friday that the market was extremely quiet as we edged toward our requisite respite and the bulls enjoyed the benefit of everyone else's doubt. Given it was the second lowest NYSE volume day of the year, an intuitive trader may have hypothesized that The Artist would take home the Oscar for Best Picture.

Wait-too much of a stretch? Whatever, it's Monday!

The other drama over the weekend-other than my Syracuse Orange almost blowing a 17-point second half lead to UCONN-was in Mexico City, where the G-20 met with hopes of avoiding becoming the G-10. European leaders looked to G-20 finance ministers to help tackle their crisis but they were given the Heisman, which put the onus squarely back on Germany's shoulders.

The next plot twists in this treacherous reality show will be today, when German parliament votes on the latest bailout package (this is expected to pass) and the European meeting of finance ministers in Brussels on Thursday and Friday, where the rubber will presumably meet the road.

Meanwhile, the vernacular continues to fly back-and-forth across the pond, with Treasury Secretary Tim Geithner saying in Mexico that Europeans needed to make their plan more "credible," while on the same day, German Finance Minister Wolfgang "Puck" Schaeuble said that "Europe has done its homework."

As discussed on Friday, there are three primary points of Parliamentary Procedure that warrant a quick mention.
  • I see and respect the bull case; particularly the prescient vibes that have been persistently expressed from within our community. My sense, however, is that we've seen the "easy" trade on the upside (which is different than saying that the upside is done).
  • I believe 2012 will be A Tale of Twin Tapes.
  • We identified these precise levels back in December and postured that once we arrived here, financial asset performance would be dependent on policymakers, where "free" markets-those without government stimuli-would aggressively deflate and "modified" markets-with bearded socialism and/or nationalized assets-will act better, but arrive with profound costs and unintended consequences.
I entered the weekend with a short bias (under S&P 1375) and will look to manage that risk and edge back toward a "hit-it-to-quit-it" mentality until the dust settles overseas (Europe and the Middle East, which I sense will flare up as a function of social mood; and yes, I sincerely hope I'm wrong on the latter matter). Crude, as discussed Friday, is an intuitive proxy for that tension.

Keep an eye on the financials as their price action on Friday was in fact a tell, as we discussed on the Buzz. & Banter; Bank America (BAC), Citigroup (C), Wells Fargo (WFC), JPMorgan (JPM) and Morgan Stanley (MS) were pretty in pink, and the BKX is now down a full percent from the all-important BKX 45 level that we highlighted at the time. BKX 42, where the 50- and 200-day intersect, will be the first level of support.

On the other side of that ledger, at least on Friday, was the firmer tone in tech, as evidenced by the action in Apple (AAPL), Salesforce (CRM), and Google (GOOG). Indeed, it's hard to believe that we're 36 handles away from NASDAQ 3000, a level last seen on December 11, 2000 (hat tip, Conor Sen).

The goal is to keep loose grips on our handlebars as we together find our way; we cannot let this dominate our lives as the best performance, financial and otherwise, will always be achieved from a place of personal balance. One step at a time as we together find our way; good luck today!

Random Thoughts
  • If you're the Ziff family, how do you feel about Eddie Lampert gaining $160 million in his personal P&L since he bought your Sears Holdings (SHLD) stake?
  • Can we look at this market another way by asking, "Who is winning the War on Capitalism?"
  • Does the path of maximum frustration require the bears to capitulate before the second side of the twin tails arrive?
  • Inflation in things we need and deflation in things we want?
  • And finally, while most banks are being vilified for their role in the financial crisis, I'm seeing several large institutions make legitimate efforts to give back, promote financial empowerment, and turn obstacles into (our collective) opportunities. In other words, don't dismiss some of these players as a matter of course; if you do, you're liable to miss an opportunistic evolution!

Twitter: @todd_harrison

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