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THREE THINGS I THINK I THINK

1) What have you done for me lately?

Should we blame the political system for the downfall of Wall Street?  Wall Street has increasingly become a place of “what have you done for me lately”.  The advent of the day trader and the hedge fund simply represent this incredible shift towards short-term thinking.  Louis Rukeyser’s Wall Street has evolved into “Mad Money” and “Fast Money”.  But where does this change in psychology come from?  Is it the politicians who are running for re-election seemingly every day?  Is it simply the information age and a case of wanting everything sooner rather than later?  I don’t know.  But politically, this is a disastrous change.  How can we get back on track towards a sustainable recovery when every policy measure we implement appears to be an attempt to fix some short-term problem that just happens to coincide with an election?  I can handle the advent of the short-term trader (in fact I prefer it), but no one in Congress thinks of the long-term anymore and that’s a scary fact.

2) The one thing that jumps out at me

“What’s the one thing that most jumps out at you over the last few years?”  That’s what someone asked me a few days ago.  The one thing that has really jumped out at me in recent years is the overnight futures markets.  I like to trade illiquid markets.  It’s why I stay up late and why I get up early.   An illiquid market brings out the weakness in people.  It makes their trigger finger itchy.  It makes them scared.  If you’ve never traded a 3%+ spread then you’ve never traded.  I’d say that it puts hair on your chest, but it does more than that.  You can lose a mountain of money being on the wrong side of a collapsing market with only a few participants.  The bids often fall off the board in these situations – just like they did on the day of the flash crash.  It’s a hopeless feeling.  I’ve been that guy before.  But I’ve always learned more from the losses than the wins.

In recent years those spreads have closed (at least it feels like they have – perhaps it’s just more volatile and a bit more liquid).  It is similar to the way it was back in 2008.  Not that this is the same level of fear, but the participants are itchy.  The Dow futures move 50 points overnight in minutes.  It’s incredible.  I used to be able to sleep at 1AM and wake up at 7AM and tell you where the futures would be within 10 points (on most days).  No more.  People are permanently frightened of this market.  And rightfully so.  With two crashes in as many years the market feels broken.  But the fear will one day turn to euphoria.  It always does.

3)There’s never enough time

I used to wonder why older people always said that they wished they had more time.  As I slowly but surely find myself becoming one of these “older people” I now know what they meant.  I have come to loathe time as the years go by.  There truly never is enough of it.  Along with my hatred of time comes my hatred of sleep.  It sickens me to think that I will sleep thru as much as 30% of my life.   Speaking of time – how about this rally?   As I sat in the tall grass I missed a juicy, but quick antelope.  Just 10 days ago I was looking for a spot to get long.  9 days and 8% later and here we are.    The meal is long gone.  Wow.  You know we’re not in a normal market environment when we get those kinds of moves.   It will be interesting to see the sentiment data in the coming weeks.  My guess is the aforementioned euphoria is just around the corner….It’s only a matter of time in this schizophrenic market.

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