Random Thoughts: When Did Recession Become Public Enemy Number One?
Is the US government playing a Jedi mind trick with debt?
Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.
I was listening to Dick Fisher and the folks on CNBC this morning discuss the importance of avoiding another—GASP!—recession.
Riddle me this, Batman: Since when did recession become Public Enemy No. 1? I was schooled to believe that recessions, much like forest fires, were scary and dangerous yet necessary for a fertile re-birthing.
We used to talk about this a lot on Minyanville—The Anatomy of a Recession—and that was four years ago!
While the S&P (^GSPC) is roughly 140 points higher since those thoughts were first shared, we're left to wonder what the cumulative cost will be, both financially and perhaps more importantly, through a socioeconomic lens.
We've seen upwards of $13 trillion in stimulus in one form or another? With $40 billion per month now promised for an infinite amount of time? All the while, domestic GDP remains less than 2% per year? This is either the definition of failure or they’re fuelling the jets for an asset-class bubble to end all asset bubbles—and that’s saying something!
There are two conversations, naturally: the path we take, and the destination we arrive at.
As a trader, we don't much care about where we end up; we just need to collect shekels as we move from one end of the continuum to the other.
As human beings, watching a world awash with acrimony, unrest, and strife, one can't help wonder if we've mortgaged our future to placate an immediate gratification fix.
As a card-carrying free-market capitalist, I'm no fan of the current course. I will admit, however, that I don't know what the "other side" of this trade would have looked like if we allowed medicine to cure the disease (debt destruction, deflation) rather than injecting more drugs that mask the symptoms (more credit, inflation).
And then there's this thought—what if the USA is acting as a toxic debt mortgage dump? What if they—I mean, we—are Fannie and Freddie in reverse, the ultimate—and perhaps only—conglomerate big enough to digest and ultimately retire the excess debt?
That would seemingly address the fact that risk hasn't been destroyed, it simply transferred from one reality—corporate America—to another—America Corp.
Things that make you go hmm...
- We enter Turnaround Tuesday with Europe pretty in pink, performance anxiety percolating, and expiration on tap (we'll see those influences in the sessions prior to Friday).
- Was the Fed's announcement of QE with no end date the last bullet in the Fed’s arsenal? Perhaps; this is what we spoke about last summer, which was a reprise of a vibe first shared in 2007 as central banks began to mobilize.
- We often say to never let an opinion get in the way of making money. While that's easier said than done, it's paramount to successful trading in this environment.
- Over the course of my career, whenever I've adopted the mindset, "Give me a pullback so I can cover," or "Give me a rally so I can get out," it's typically preceded a major turning point for the tape.
- Why are central banks so aggressive? Are they being prudent, or is this akin to August 2007 when we witnessed a similarly coordinated global agenda put in place? If you never read The Credit Card, it's worth five minutes of your time.
- Trading tells include Goldman Sachs (GS) and JPMorgan (JPM), crude (Mid East social unrest proxy) and the super-tech duopoly of Google (GOOG) and Apple (AAPL) for signs of slippage (Apple trades like a beast).
- The inspiration for the second song was an article in the Wall Street Journal, The Fed is Playing the Tune, the Market is Dancing. And I quote, "Profit growth flat-lining? Dance. Unemployment high, labor force shrinking? Dance. Global economy luffing? Dance. Dance. Dance."
- We penned some vibe on The Three Phase of Leave -- Denial, Migration, and Panic a few short days ago, which was pretty apropos, in hindsight. Again, the ingredients are in place for a panic higher; whether or not that happens—or if "this" is already baked into the tape and the lens shifts to the "why"—I'm not smart enough to say.
- See both sides as we together find our 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 firstname.lastname@example.org.
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