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Financial Storm Clouds Form on the Horizon

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Capital preservation is the first step toward wealth accumulation.

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MINYANVILLE ORIGINAL

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

I'm a grumpy ol' troll, living under the bridge.
-- Dora the Explorer

I never wanted to be that guy, but it has always been our passion and purpose at Minyanville to tell the truth.

Old school Minyans know all too well the evolution of our voice. Some joined us in Ojai when we delicately discussed the approaching housing crash; others ventured to Vail as we set the stage for the socioeconomic malaise; many raised their eyebrows when we fingered Dead Banks Walking in the summer of 2008; and when we foretold the sovereign sequel to the first phase of the financial crisis in 2010, it was well before its time.

It's impossible to be persistently prescient when it comes to our derivative-laced, financial-based global marketplace as the rules continuously and dynamically shift. What was once a noble profession that greased the wheels of capitalism (which used to be a patriotic and proud word) has morphed into a massive joust for survival with central banks on one side and cumulative structural imbalances on the other.

The more things change, the more they stay the same, albeit with entirely higher stakes.

While I could offer that Minyanville stair-stepped the nuts and guts of our financial journey with a forward-looking lens, the "me, here, now" society only wants to know one thing: What's next, and how do I benefit?

I will say it again-I never wanted to be that guy. I've traded two-sided this year. While my performance is roughly 10% off the 2012 high-water mark, I've been rewarded with that approach. I do not enjoy being the pessimist realist, particularly when there are so many reasons to climb aboard the bovine bandwagon: QE3 is all but a given, European leaders are vowing to do "whatever it takes," and there is percolating performance anxiety into quarter- and year-end.

These are all very real upside catalysts; they're also very well known at this point.

Last night, after my wife Jamie, the kids, and the twins' father, Paul, enjoyed dinner-yes, we roll that way as it makes the children happy- I picked up The Wall Street Journal, flipped through the pages, and tossed it back on the kitchen counter.

Before I realized it, I mumbled out loud, "Man, we are going to crash and when we do, it's gonna make 2008 look like a pimple on an elephant's ass." When Paul asked me when, I smiled and said, "If I knew that, brother, I would be a very wealthy man-but my best guess is by next year."



We all know the story about the boy who cried wolf, and I make it a point not to cry and to avoid wolves. A few weeks ago, my intuition got the better of me and I posed the question, Is the Stock Market Setting Up for a Crash? Knowing thyself, I should have sat on that column for a month or so as I'm typically early and yes, often wrong. Still, I can't shake the sense that something wicked this way brews; what I am unclear on is the timing, and as we know, timing is everything.

On September 18, 2008, I penned a column after enjoying a delicious dinner at BLT Steak in Manhattan, and shared on Minyanville:

I walked into a restaurant last night and, on the way to the men's room to splash water on my face, I stopped and looked around the room. As I watched the smiling, unsuspecting patrons, I felt like jumping on a table and screaming, "PAY ATTENTION to what is happening!"

The S&P 500 traded 45% lower over the next six months.

On May 3 of this year, a week or so before I was raced into the OR, I shared a similar vibe:

I've been plenty wrong before but I would be remiss if I didn't share that I haven't slept much the last few nights, and that "Sleep-O-Meter," long dormant, has a pretty powerful track record. I tried to enjoy a charity benefit last night but as I looked around the ballroom, a distinct intuition emerged, one that hasn't happened since September 2008; I wanted to jump on a table and scream, "PAY ATTENTION TO WHAT IS HAPPENING!"

The S&P dropped 10% on a straight-shot over the next two months.

I am not jumping on a table at present-too many crosscurrents with election agendas, European survival hanging in the balance, and a Federal Reserve Chairman who will stop at nothing to flood the system with liquidity and preserve his legacy (the jury is still out; remember, the world revered Alan Greenspan for many years). I am, however, imploring you to see all sides and remove emotion from the trading equation.

Fortunes will be made and lost into year-end and beyond; I remain of the view that capital preservation is the first step toward wealth accumulation.

R.P.

Twitter: @todd_harrison

Follow Todd and over 30 professional traders as they share their ideas in real-time with a FREE 14 day trial to Buzz & Banter.
No positions in stocks mentioned.

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 todd@minyanville.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.

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