Editor's Note: Todd posts his vibes in real time each day on
Buzz & Banter
Good morning from Minyanville East, where I'm settling in after a
stretch of some much-needed balance. I was off the grid in Cuba at
the end of last week -- someone is going to make a
of money when the embargo is lifted -- and have been playing
'ketchup' on the tape in my absence.
This is what I've garnered, in no particular order:
) priced at $26, opened at $45.10, rallied to $50 in short order,
and retreated to close at $41.65. That little birdie is now worth a
shade under $24 billion despite not yet earning a profit. I learned
long ago not to buy or short on valuation alone, but the numbers
are staggering as these things go.
GDP was better, but due to unusually high growth in inventories;
and the non-farm payroll data was strong, although the BLS removed
furloughed federal government employees from the sample set so it
wasn't a "clean" report.
The ECB cut rates, and while a 'surprise,' it was more
psychological than structural and begs the question "why" given
we're at all-time highs in several major markets.
On Twitter Thursday, the
(INDEXSP:.INX) opened 10 points higher and closed 24 points lower,
which was a "major daily engulfing candle" that wiped out the prior
nine sessions. That pattern gave the bears a leg to stand on -- it
typically indicates a change in trend -- but the late-day melt-up
on Friday more or less negated that, or so the thinking goes.
With 35 sessions left in the calendar year, the performance anxiety
is good and thick. The
Dow Jones Industrial Average
(INDEXDJX:.DJI) is up 20% for the year, the S&P 500 is 24%
(INDEXNASDAQ:.IXIC) is almost 30% above where it started 2013.
Those returns are not too shabby and fund managers are on edge, for
if they underperform their benchmark, they could be looking for a
new job when the ink dries on their year-end letters.
remain important technical support levels for the major averages,
and until those are breached, the bulls will buy the dips with
reckless abandon. You may not agree with the price action, but
you should most certainly respect it
; there are a lot of motivated agendas in play, from politicians to
policymakers to investors and back. Manage risk rather than chase
reward as we together find our way.
What Would Bennet Do?
I've been trading 23 years and have experienced my fair share of
drama; I'm not sure I've ever been as exasperated as I was last
week prior to my work-related yet enjoyable respite in Cuba.
It wasn't about positioning (my risk has been managed) nor was it
any one particular item. It was more of a cumulative sense of
financial fatigue and what constitutes news in today's digital age.
Last week, the biggest story making the rounds was that
) economist Jan Hatzius suggested that the Fed will lower the level
at which it would begin to hike rates when it meets in March. He
believed the Fed will lower the employment threshold from 6.5% to
6.0%, which is effectively "easing," if such a thing is possible
given the Zero Interest Rate Policy, or ZIRP.
Taken in isolation, you may have wondered, "What's the big deal?"
When viewed in the context of $5 trillion of quantitative easing --
and the increasing likelihood that
the Federal Reserve will try to make all that
inventory magically disappea
r -- the imagery of officials moving the goalpost off the field,
through the stands, and toward the other side of the parking lot --
until such time the bears threaten to score -- comes to mind.
I'm all for making money -- I love it, actually -- and I get that
there are structural imbalances in the system that need to be
addressed or otherwise rectified. What is maddening, at least to a
card-carrying free-market capitalist, is that the rules of
engagement continue to change in the midst of the game. And I use
that term loosely -- this is anything but a game.
The stock market is at all-time highs. Traders who broke the law
have been tarred, feathered, and altogether hung in the public
court of opinion. Credit markets are greased to the gills as
corporations lock rates in for 50 years into the future. It's
Kumbaya, Festivus, and Woodstock rolled into one, with little if
any semblance of perceived risk.
I hearken back to six years ago, when
Bennet Sedacca and I dove deep into the topic of
. I think of Bennet often, wondering what he would say if he was
around to witness the current day. We are lucky to channel him
through his son
, who is a chip off the old block, but Bennet had a gruff honesty
to him that cannot be replicated. I often ask myself, "What would
That question will remain unanswered, but
we can glean wisdom from his musings
, one of which is that "bailouts delay 'Social Darwinism' and the
natural business cycle, and artificially delaying the cycle will
create a more horrific final event." This is a concept
I have written about extensively
and believe in my core; it's also one that has cost me great
opportunity and provided a fair share of humility.
I don't how long 'this' will last (or how we've come so far, so
fast) but unless everything we've ever learned about the business
cycle -- or cycles in general -- can be erased...
unless the laws of motion are being rewritten
before our very eyes
... we must see the other side and prepare in kind. A rising tide,
in addition to lifting all boats, has the potential to create a
very damaging tsunami.
Food for thought on a Monday -- and I know, it won't matter until
it does. In the meantime, I'll share some Random Thoughts for your
- How in the world does
Chipolte Mexican Grill
) have a $16 billion market cap in an efficient market?
- Can we agree that
is a lot more problematic
than crude $150?
) get interesting on the long side into year-end as funds purge
them from their sheets?
- I mean, didn't bulls make money buying BlackBerry on 12/31
the last five years, if only for a trade?
- Or can the same be said about most stocks?
- Did Bill Ackman do his
) stock replacement (on the short side) to free up capital? Why
else would he assume so much theta?
- Randolph and Mortimer Duke used to debate the bigger
influence: genetics or environment. No such discussion is needed
on Wall Street -- the bulls are higher and the bears are lower.
- One step at a time; the trick is to enjoy it.