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Random Thoughts: A Big-Picture View of the World


Taking stock of the American Dream.


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

It's not often I read an article that makes me think-really think-about the implied message, style of prose, and broader implications.

On my commute home last night--I'm trying to improve my time management skills, one train ride at a time--I chewed through Josh Brown's recent missive, American Idle: Five Reasons We Hate the Stock Market.

While there were parts of it that I agreed with more than others, it provides an extremely accurate depiction of the perception of Wall Street through the eyes of mainstream America. This column arrived, of course, on the heels of PIMCO co-CIO Bill Gross positing The Death of Equities.

Minyanville's resumé regarding the global financial landscape is well-documented. While we may have been a tad early, we were ahead of the curve in forecasting the housing crash, fingering a "prolonged period of socioeconomic malaise entirely more depressing than a recession," identifying the percolating class warfare, warning of the "technical insolvency" of the banking industry (while they were trading at all-time highs), and pointing to the sovereign sequel to the first phase of the financial crisis.

We rarely champion the above foresight because quite honestly, nobody cares; people don't want to hear about who was right, they want to be informed about what comes next--how to prepare, prosper, and yes, stay ahead of the curve. There's no shame in admitting this environment is hard; there's only shame in pretending it's not. Yes, I say that a lot; sometimes repetition breeds familiarity and perhaps--perhaps--eases some of the strain that we all feel.

I believe we're in the middle innings of the weeding-out process that is long overdue and extremely healthy (while it doesn't feel that way, we must go through it to get through it, and we're going through it now). A forest fire is scary and dangerous as well, but it is necessary for a fertile re-birthing. History will view this stretch through a similar lens and the leaders emerging from the crisis won't be the same as those who entered it.

In September 2008-right in the thick of it-I penned The Great Expression. To borrow a quote:

The media portrays the Great Depression as one where everyone in America stood on street corners or waited in a bread line... I view the Great Depression as the framework for optimism. Most of society worked, great discoveries were made and formidable franchises were established.

Disney (DIS) built a global franchise through that period.

Hewlett-Packard (HPQ) was born on the back end.

Texas Instruments (TXN), Tyson Foods (TSN), and Continental Airlines (CAL) were birthed.

Indeed, if the greatest opportunities are bred from the most formidable obstacles, we're about to enter a most auspicious era.

As bearish as I was prior to many of the historic events discussed above, I will be equally bullish as we emerge through the other side of the sovereign sequel (I'll likely take a fair amount of heat for being "misguided," much like I did back then, but this will be a process, not a point in time).

What I've yet to reconcile-and this is me being honest-is the path that we take to get there. I maintain that we must see debt destruction (medicine) rather than injecting more stimuli (drugs that will mask the symptoms), but that view doesn't seem to be shared by those pulling the strings at the Federal Reserve.

If you put a water pistol to my crowded keppe, I would say that the market will call the central bank bluff; that, when the dust settles, we'll again learn that nobody-and I mean nobody-is bigger than the markets for an extended period of time.

From here to there, I'm keeping my long-term nest egg dry (100% cash) and actively trading my short-term bucket as, and only when, advantageous opportunities emerge.

It's not for everyone, I know, but it's the best I can offer as we edge through the most interesting economic juncture in the history of the world.

Random Thoughts:
  • When Google (GOOG) opened flat in the face of higher futures yesterday, I initiated a small short position in the stock with a tight stop. We are updating that position in real-time on the Buzz & Banter and yes, we'll offer a free two-week trial (because you're you!).
  • My sense-and it's just that, a sense-is that the tape will be tested on the downside. NDX 2700 and SPX 1400 are levels to monitor as we together find our way, although both have some room before the technical targets are touched.
  • Better lucky than smart, I punted my Facebook (FB) long into yesterday's strength ($22.35 or so). If the stock approaches $19-which is a 50% Fibonacci retracement of the entire price lifecycle-I'll likely reload for a trade.
  • Festivus 2012 will be hosted on Friday, December 7 this year. If you've never been, click here to see some photos of past events. If you wanna lock your spot-it's awesome, and 100% of net proceeds will benefit The Ruby Peck Foundation for Children's Education-you can sign up now and use "Friends12" as your early-bird discount code.
  • Jamming and juggling-I'll see YOU over on the Buzz!

Twitter: @todd_harrison

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Position in NDX, GOOG.
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