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Monday Morning Monitor: Will the European Contagion Continue?


Investors wait for any semblance of unity from across the pond.


Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.

Markets in turmoil? Not so much, at least not yet. Spain is more than 3% higher and the rest of the euro periphery is holding tight. Stateside, the S&P (which traded down 12 handles last night) and Nasdaq (which were down 20), both start the week in the green. And yes, where they finish is entirely more important than where they start.

I spent much of the weekend monitoring my Twitter feed (much as I hate to admit it) and it was extremely bearish; perhaps the path of maximum frustration should continue to play through as investors await "breaking news" coming from central banks around the world.

Some random thoughts, in no particular order:
  • It took Eric B and Rakim a long time to think of a master plan; I imagine it will take European policymakers, each with different needs and wants, some time to map that as well. Given markets move in real time and policy takes time, as we saw in 2008, the chasm between those two horizons is where the risk resides.
  • In hindsight, I should have left the Google (GOOG) downside hedge on, but if wishes were knishes, I would still weigh 235 pounds.
  • Friday's price action in gold is hinting at QE3; raise your hand if you love invisible catalysts!
  • S&P 1285 (the 200-day) has morphed into near-term resistance; S&P 1300 lurks behind that. S&P 1200-1250 still tingles my antennae for some reason, but that's more 'hair on the back of my neck' than scientific equation.
  • I co-hosted Bloomberg Rewind Friday afternoon, and two Yahoo Finance segments this morning, both of which will soon air on Minyanville. Stay tuned, if such things interest you.
  • While I could have traded the tape last week a bit differently, I like my positioning at present: 98% (soon to be 100%) cash in my trading account, a significant move into real estate (with a 20+ year horizon and a 3.1% mortgage), and psychic income (in the form of my family) coming out of the yin-yang.
  • And yes, that trading powder is subject to change, as updated in real-time each day on the Buzz & Banter (click here for a free trial!).
  • As per Peter Atwater, and with regard to Friday's putrid economic data, "It's not the depth of the recession, it's the length; anyone can hold their breath for a minute when they're 10 feet underwater, yet a person will drown in six inches of water if he's face-down long enough."
  • We continue to see high-beta multiple compression (in stocks such as LinkedIn (LNKD), Apple (AAPL), Salesforce (CRM); I wouldn't say it's all a function of Facebook (FB) but it certainly didn't help.
  • As always, it's a confluence of factors and you won't see The Blame Game being played on this channel (the more things change, the more they stay the same).
  • $13 trillion in stimulus yet we're seeing 1.9% annualized growth? Where would be be without $13 trillion in stimulus? Deeper in deflation, but 13,000,000,000,000 steps closer to a genuine recovery?
  • The bifurcated market of haves and have-nots continues to continue. As we saw in 2008, the crunch arrives when we see voluntary thrift and involuntary thrift; when those without cannot afford to fill up their tanks and take their families to Applebee's, and those "with" choose not to spend their ample coin on high-end luxury items.
  • BKX 44 and DAX 5810 (our longstanding German target) are levels of lore, and let's not forget, the Greek elections are coming up quick (June 17).
  • What keeps you up at night? The unintended consequences of our current policy path. Sovereign lifeguards saved corporate America in the first phase of the financial crisis; who will save the lifeguards in the sovereign sequel?
  • The most interesting factoid I read last week on the Buzz? Courtesy of Peter Prudden: "$70 trillion in G10 debt is the collateral for $700 trillion in derivatives -- and 1200% of global GDP."

Twitter: @todd_harrison

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