Full Disclosure: The Heart of the Matter
An inside-out view of the world.
Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.
“Once in a while you get shown the light in the strangest of places if you look at it right.”
-- Grateful Dead
Minyanville is a community predicated on truth and trust. While I debated sharing this profoundly personal story, I’m compelled to put it out there as life is what happens while we’re watching the markets. I do so in good conscience as a reflection; the worst is in the rear view, and the prognosis—both for myself and the ‘Ville—has never been better.
A few weeks ago, I had palpable discomfort in my chest; I went to my general practitioner and was told that I had something called Bornholm Syndrome. He prescribed painkillers and sent me on my way. I won't get into further details here but suffice to say that it wasn't the best advice I've received from a doctor; in fact, it was the wrong advice.
Last Monday, following a meeting downtown, I was rushed to the emergency room at New York hospital with severe chest pains and shortness of breath. I was discharged 16 hours later and ushered to a specialist—a top cardiologist—at NYU. I was admitted, they did a slew of tests, and I was diagnosed with pericarditis (inflammation of the heart sac).
They prescribed massive amounts of ibuprofen, told me to take it easy and I was discharged on Wednesday; the worst had seemingly passed.
Friday morning my symptoms intensified; I was in tremendous pain. My fiancée Jamie rushed me to NYU emergency room where they probed, prodded and repeatedly stuck me. This time they found an enormous amount of fluid surrounding my heart—a virus, most likely caught from my daughter Ruby, had attacked my heart. It is very rare for a virus to attack organs, much less intensify at the rate that it did. The surgeons were surprised.
I was rushed into emergency heart surgery (pericardial effusion) which literally saved my life (thank you Jamie). In the words of the chief cardiologist, it was an "extremely dangerous" situation and I was "the sickest guy in the ER." The irony was that the entire time I was in ER, I felt like I was ‘wasting space’ for someone who really needed help.
I am now 100% on the road to recovery; we got the results of my latest echocardiogram and there were no signs of that nasty fluid, which was presumably drained through a tube that remained in my chest for three days. There is some inflammation, but that is to be expected. I can tell you that I feel tremendous, albeit a bit lethargic; my color is back, as is my sense of humor and I have newfound perspective; indeed, through that last lens, this may be the best thing that ever happened to me.
The most important news is that there is no structural damage. I will need to rest for a bit but I'm already up and about, walking as I can and happily home after a week in ER/ICU. All in all, I am profoundly grateful, extremely lucky, and appreciating every single smile from our terrific children. As today is Ruby’s first birthday, I can’t help but think that a few Rubys had my back on this one.
Thank you for understanding; now you know the Full Monty and I can get back to doing what I do best: being a good husband-to-be, a great father and step-dad, a loyal friend, and yes, a market practitioner on a passionate mission to effect positive change through financial understanding.
Painting the Global Market Picture
Two weeks—and upwards of 85 S&P handles—ago, I began to share a particularly bearish bent in Minyanville (see: Will European Elections Trigger the Next Phase of the Financial Crisis?). We highlighted levels such as S&P 1375 (on the downside) and DAX 6500, while noting the bearish setups in Deutsche Bank (DB), among others.
The following Monday, while the markets bounced sharply, we reiterated that stance in our article, The Morning After. As S&P 1375 was back-tested to the upside, we put it out there for all to see.
I'm not prone to hyperbole and the above missive offered a full take on what I saw and perhaps more importantly, felt (on Thursday). While we strive to remove emotion from our process, we're human beings at the end of the day—but me no likee the stock market at these levels, not one bit.
We further highlighted bearish setups—such as the head & shoulders we spied in Goldman Sachs (GS) when it was trading at $110, which “works” in a technical vacuum to GS $93—and stayed true to our cautious course as the German DAX tried to surmount our all-important line in the sand at 6500. These were our guidelines and we would have stuck to them; discipline must always trump conviction.
Last Wednesday, while in a hospital bed juggling devices and waiting to be discharged—the proverbial calm before the storm—I penned my Global Market Trading Strategy. It offered a forward lens with regard to our stair-step risk management process—what we would do if and when S&P 1340 broke—as well as my personal trading approach to the above. I felt pretty good about the script, which isn’t to say it would prove right. If you don’t stay humble in this business, the market will do it for you.
The following day, I put it all out there in DAX and S&P 500 Suggest We’re Not Out of the Woods. In addition to full disclosure on my personal positioning—not just the what, but the why—I weighed in with some thoughts on Facebook (FB), an update on Deutsche Bank and a review of our Five-Step Guide to Contagion, which is as relevant now as it was two years ago when it first published. We also offered to “be careful” into the weekend, as fund managers were likely to be risk-averse given the unknowns across the pond.
Finally, this past Monday, a few days removed from surgery, I penned my most recent article, Random Thoughts: DAX, China, Crude and the Ongoing Saga in Europe, although I’ve been offering my best thoughts in real-time on the Buzz & Banter (and continue to do so each day). Yes, the doctors told me to rest, relax, and recuperate and my response to them was: This is me resting, relaxing, and recuperating as we together ride the world’s wildest reality show!
A Forward Lens
While the “easy” trade has seemingly passed on the short side, it’s important that we sync our time horizon and risk profile. By now, many of the chants from the bear camp are loud and mainstream—Greece, Europe as a whole, faith in our financial system, confidence in policymakers, real state issues (California), structural labor deficiencies, tepid growth despite upward of $10 trillion in stimulus—and two-sided headline risk remains.
Make no mistake; nobody wants to see the eurozone splinter, with the exception of many Greeks themselves, so there will be efforts to marry “austerity” with “growth initiatives,” at least in premise and through promises. I personally don’t think it’s a tenable situation, and haven’t for a long time, but we must always attempt to capture the chasm between perception and reality. This will play out over years, not days, and that is what I mean by syncing your time horizon with your risk profile.
In terms of near-term news, the Facebook IPO is the hot topic of the day. While we’ll likely see a retail-driven pop, I have no interest in chasing this puppy. I think Mark Zuckerberg did himself and his investors a disservice by showing up to the institutional road-show with a flippant attitude and “hoodie” attire, and if I’m wrong, my greatest loss is one of opportunity. I’m entirely more inclined to wait for Twitter, which I feel is revolutionizing advertising, and LinkedIn (LNKD) at the right price.
Which brings me to our near-term roadmap; the current stair-step for risk management is S&P 1300-1340, and support/resistance will morph into each other with a significant breach either way. If you put a water pistol to my head, I would blurt out “S&P 1250!” as a realistic target but nobody is smarter than the market, least of all me. I will simply remind you that the sharpest downside moves tend to occur in an oversold environment just as blow-off rallies typically occur in an overbought market. And yes, DAX 6500 continues to matter, as it “works,” in a technical vacuum, to DAX 5800.
Seeing “through” the sovereign sequel to the first phase of the financial crisis—and again, the length of this process is more important than the depth—I am a raging bull in waiting. I foresee a millennial generation that doesn’t give a hoot about the difference between experience and skills, and a wave of human capital that will reinvigorate our markets, our society and our country from the inside out.
That is what truly excites me, and I know it won’t come easy, and it’s sorta why we do what we do in Minyanville; we believe in empowering generations, effecting positive change, and doing business a better way in a world where many have seemingly lost their way. And I can tell you this with an extremely high degree of confidence: It’s a tremendous time to be alive and the future is in our hands. Let’s not squander the opportunity; let’s make it count, every step of the way.
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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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