The Three Phases of Leave
An unemotional approach to investing.
Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.
These are heady days in the financial markets. Late last week, world peace broke out after Mario Draghi boldly pledged what no ECB president has pledged before: an unlimited bond-purchase program in an attempt to rein in sovereign interest rates and protect the eurozone currency. That was followed on Friday by jobs data that was so fugly, Jets fans could be heard chanting QE3 all the way from the Meadowlands.
Yesterday, we detailed the catalysts this week that could bring the "other side" of the euphoria to fore. As shared at the time:
"The biggies, of course, are the German vote on Wednesday and the FOMC 'rate decision' on Thursday - although that will be more about QE3 than an incremental rate adjustment (real interest rates are already negative). There is also a Dutch election on Wednesday that isn't getting much press, but it will matter on the margin. Sprinkle in an Apple (AAPL) iPhone 5 launch and you've got yourself a recipe for volatility."
While many will argue that our once-noble profession-we must hearken back to the days when free markets greased the wheels of capitalism and served as the ultimate arbiter of meritocracy-has devolved into a giant game of chicken, with cumulative imbalances on one side and central bank agendas on the other, the psychological song remains the same for those still muddling through the market mechanism.
The three primary players in this process can be found below, with definitions courtesy of Merriam-Webster:
1: refusal to satisfy a request or desire
2a (1): refusal to admit the truth or reality (as of a statement or charge) (2): assertion that an allegation is false b : refusal to acknowledge a person or a thing : DISAVOWAL
1: to move from one country, place, or locality to another
2: to pass usually periodically from one region or climate to another for feeding or breeding
3: to change position in an organism or substance
1: Relating to, or resembling the mental or emotional state believed induced by the god Pan
2: Relating to, or arising from a panic <panic buying>
Or, as summed up in this nifty little chart below:
More recently, a chart was brought to my attention, although you must forgive me as I misplaced the source. It's a variation of the above dynamic with current-day influences mixed in for good measure.
Perhaps nowhere is our current course better summed up-and yes, the timing of this post is perfect as 1) Germany votes on the constitutionality of the massive sovereign aid package and 2) The FOMC weighs whether to unleash another round of stimulus despite mainstay market proxies trading at four-year highs. Four-year highs and they're still contemplating another adrenalin shot.
Says a lot, eh? Particularly against a backdrop of 1.7% GDP in the face of upwards of $15 trillion in aggregate stimulus since the first phase of the financial crisis arrived. But there's nothing to see here; move along folks.
I detail my active trading each session on the Buzz & Banter (click here for a free two-week trial). That's the best-and most timely-content in the 'Ville, so if you wanna learn a lot from folks a lot smarter than me, give it a shot-you've got nothing to lose!
Good luck today.
Follow Todd and over 30 professional traders as they share their ideas in real-time with a FREE 14 day trial to Buzz & Banter.
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.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.