"Street Critique"-Todd Harrison, Founder & CEO, Minyanville.com
Wednesday, January 03, 2007PAUL KANGAS: Tonight's "street critique" guest says he thinks the bullish momentum that propelled the stock market higher in the second half of 2006 will continue over the near term. He's Todd Harrison, founder and CEO of the financial education website minyanville.com. And Todd, welcome to NIGHTLY BUSINESS REPORT.
TODD HARRISON, FOUNDER & CEO, MINYANVILLE.COM: Happy New Year.
KANGAS: And the same to you. Now let me ask you first if the abrupt downside reversal after the Fed released the December minutes of its FOMC meeting today, was that sell-off overdone?
HARRISON: I think we have to be careful not to read too much into one day's action. We had nice momentum into the end of the year. There was a lot of euphoria floating around the market this morning. I think it was an excuse to take some profits.
KANGAS: You do see the markets, nevertheless, moving higher over the short term. How short is the term and then what happens?
HARRISON: Well, I think that depends on the dollar. I'm watching the dollar really as the valve that's controlling most all asset classes. And as long as the dollar stays relatively stable or lower, I think the momentum can continue, but I think there's some longer term issues with the greenback.
KANGAS: So you're concerned. You think the dollar could go lower. The chances are probable it will?
HARRISON: Eventually it will. (INAUDIBLE) a little bit negative in the short term and there's a lot of debt out there that's being serviced, that's maybe driving the dollar back higher structurally, but I think the broader trends, the secular trends are the support of the lower dollar.
KANGAS: Lower dollar is good for gold, is it not?
HARRISON: It is good for gold. Gold and energy are actually two sectors that I think are relative winners, versus tech and financials, and I'll stress "relative" because you can't really spend relative performance. But if you could pare off some energy and metal holdings versus some tech and financials, I think you'll do quite well.
KANGAS: I also understand you expect an up tick in market volatility this year. Why do you believe that?
HARRISON: Absolutely. I think volatility has been compressed, and I think that the proliferation of a lot of income funds that are selling volatility, are selling options, has exploded, so that's actually created a compression marketplace and I'm not sure what the catalyst is, but I expect market volatility to up tick nicely in the next year.
KANGAS: We have been reporting about the expected reset of $2 trillion in adjustable rate mortgages this year. Give me your take on that. Do you see that reset as a defining force in the economy this year?
HARRISON: I think it has to be. I live in New York City and I rent rather than own, but a lot of consumers out there in the heartland have used their home equity, you know, as a vehicle to support their -- you know, their spending habits. The savings rate in our country is just absent. So I think the Fed is in a bit of a box. I think they want to raise rates to appease the foreign holders of our debt, but I think they need to lower rates to combat potentially slower global growth and this adjustable rate mortgage reset.
KANGAS: OK, so that could be a rather tumultuous occurrence, correct?
HARRISON: It's a tight rope.
KANGAS: OK. Todd, I want to thank you for joining us. It was great to have you on our air.
HARRISON: Paul, thank you. You have a good New Year.
KANGAS: And the same to you, my guest, Todd Harrison, of minyanville.com.
