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Stock Buyers Beware: "Another Side to This Financial Crisis" Is Coming, Says Todd Harrison

Posted Oct 18, 2010 01:25pm EDT by Peter Gorenstein in Investing, Recession, Banking

The stock market continues to rally, with Dow 11,000 providing little resistance to the stampede of the bulls.

Stocks are up modestly on the day, thanks in part to a better-than-expected earnings report by Citigroup. Not only did profits rise, the amount the bank set aside for loan losses fell. The improvement in corporate credit is "boding for higher stock prices still," says Minyanville.com CEO Todd Harrison, as is, the promise of "QE2" -- a second round of Federal Reserve stimulus.

At the same time, Harrison worries the hype of QE2 brings with it a new market risk. "Everybody is waiting for QE2 to bail them out," but he wonders "how many people are waiting to sell on that news?"

In the near term, Harrison is "respectful" of the rally, even if he thinks the upside is limited at this point, saying the S&P 500 won't go much higher than 1200. (Midway through the trading day, the index was trading at 1180.) And he thinks the Nasdaq 100 has already reached its near–term pinnacle.

Longer-term, Harrison remains cautious with his "long-term bucket" invested in cash, as it has been for the last 2+ years. "There's still another side to this financial crisis," he warns. "We're now trying new and historic things, the stakes have never been higher, and when that bar tab comes due it's going to be a comeuppance."

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70 comments

  • A Yahoo! User
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    A Yahoo! User Thu Oct 21, 2010 03:28 am EDT Report Abuse
    The bottom line is earnings,my homies. I ask everyone to stop running their gators and tell me what threatens earnings. What menace exists now that did not exist last year and why does it threaten earnings. I am here to learn so please enlighten me. Please peep my comment below. AndTiny Tots, don't give me thumbs down. Show me how big you can be and spit it!
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    Jako D Wed Oct 20, 2010 11:00 am EDT Report Abuse
    Just wanted to say that your interviews and discussions are outstanding. Informed, intelligent guests with informed, intelligent hosts. Keep it up.
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    Charles Malloy Tue Oct 19, 2010 05:06 pm EDT Report Abuse
    They previously gave a big dose(of QE), waited to see result(s), we still have asset deflation, time for more, a whole lot more.

    The problem is that the banks are out of business as usual, and are only lending back to the government.

    That is why the money multiplier effect is not working.

    That means they can print a whole lot more before inflation sets in.

    They need normal inflation at least, to set in.

    But they also need the US Government to convert short term low interest debt into long term low interest debt, first, before higher rates kick in.

    So there will likely be a QE3 at some point soon, as well, after national debt is converted to long term debt at a relatively low and affordable rate, unless the covertion and the small business / consumer spending stimulus are accomplished concurrently by the QE2 - making it a mass scale never before seen, and very dangerous, too. Which is worse ? Japan style slow death or a sudden event follwoing a re-set button for everyone, not just the Oligarchs ?
  • 0 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 2 users disliked this comment
    Charles Malloy Tue Oct 19, 2010 01:18 pm EDT Report Abuse
    Okay Chicken Little ....

    The US is NOT Zimbabwe.
    The US is (for now) the most powerful military on the planet, and it's currency is the world reserve currency (for now).

    We have the power to devalue our currency (by printing more) and thereby make our goods cheaper overseas, and thereby enhance our net export capability, and effectively lower our relative debt burden in the process. Zimbabwe did/does not have any of those powers.

    Also, QE is done by the FED, which is "independent" of the political body in power. Bernake runs the FED. Bernake was appointed by Bush and re-appointed by Obama (which always happens across presidents), which is further major evidence that Parties don't matter, the FED matters and the FED is run by the bankers, not Congress, not the president. The FED is our true government.

    I don't like the situation either. I think the money needs to go to the man on the street (consumers) to re-prime the pump, if to anyone at all; otherwise, the big banks need to be taken over as monopolies and disbanded and merged into smaller more local banks.

    Having said that I somewhat agree, I will also say that there is no way you or I can say for sure that "there is no way it [QE2] will work."

    I agree it is just more corporate welfare giveaway to the Banking Oligarchy, and there is no trickle down - the big banks are just zombie banks, but we still do not know if it will definitively work or not work until /unless it is attempted/tried. If it does not work, we WILL have socialism at least for a time, a transition period. Before the big banks became revealed as blood sucking / flesh eating vampire zombies, we thought they were essential to our economy. Now, not so much. Now, they borrow and hold money and invest it in government securities, keeping the spread (which is what banks are supposed to with demand deposits, but not with FED free- money -the latter needs to end, be reversed by calling of the loans - of course that will cause interest rates to rise precipitously and break the US Government on it's national debt - so we can expect more of the same to keep what's going on, going on).

    QE2 needs to be aid to small businesses, and put money into the hands of consumers, not the vampires. The only way that will happen, in the current dynamic, if for the FED to give free money to the banks, the banks to loan the money to the US Government, and for the US government to spend the money through government programs to the ideal target market, small businesses and put money into the consumers hands.

    Anything else will likely be another meltdown, a financial Armageddon, in my view, this time a meltdown of the federal government over it's sovereign debt.
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    Tom Tom Tue Oct 19, 2010 11:54 am EDT Report Abuse
    I personally have a different finger I want too show these fortune tellers. It's every man for himself, use your own hunches and do your own research, you'll go further.
  • 0 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this comment
    Charles Malloy Tue Oct 19, 2010 11:45 am EDT Report Abuse
    While this guy may or may not be correct (many of the [other] comments call him a bum and a consummate chicken little) there is important discussion of this "QE2" and the fact that: " the hype of QE2 brings with it a new market risk. "Everybody is waiting for QE2 to bail them out," but he wonders "how many people are waiting to sell on that news?" "

    What is in store with QE2 ? Anything for the man on the street or is it all reserved for the Oligarchs (just more corporate welfare)?

    Did/has Japan done any of this QE like the US has done ? Is US different, as it is the world reserve currency (for now) ? Does the latter fact make the US different ? Are we more like Argentina (6 year down) than Japan (17 years and still down) ? Or are we our own bird ? More like the gradual rise and fall of Rome ? (Where are we in the process(es) ?)
  • 0 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 3 users disliked this comment
    ToMathew Tue Oct 19, 2010 08:50 am EDT Report Abuse
    This guy is a shill. He trades buckets and futures contracts. His position is too short to be reported by SEC rules. Listen to him and you may be better off buying a high caliber Smith & Wesson pistol and shooting your brains out.
  • A Yahoo! User
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    A Yahoo! User Tue Oct 19, 2010 07:53 am EDT Report Abuse
    Hey Johnny, I hope you realize that the big boys you and your finger are up against have some really fast machines, way faster than yours. And your trade goes through some broker's machine first and the big boy's machine is tied directly into the exchange. Their machine actually anticipates what you and your finger are going to do, and quite accurately I might add. They are not afraid of your finger, not at all. When they, or rather when their machine, decides to sell, you and your finger will will be left holding an empty bag LOL LOL LOL.........
  • A Yahoo! User
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    A Yahoo! User Tue Oct 19, 2010 07:39 am EDT Report Abuse
    Politicians have been lying, cheating and stealing since the begining of time...what makes the Tea Party think this time is different? What a joke! And a bad one at that.
  • 1 users liked this comment Please sign in to rate this comment up. Please sign in to rate this comment down. 0 users disliked this comment
    Dasafac Jack Tue Oct 19, 2010 07:02 am EDT Report Abuse
    The three illusions that lead to destruction are Glamour, Glory, and Greed. The most destructive is Greed for it has no pretense of Love.
    ...James E Gambrell

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