Fast Times at 'Fast Money' High - 11/23/10

As always, hanging out with Melissa, Karen and the boys on 'Fast Money' was 'Awesome! Totally awesome!'

Brad Hamilton: Why don't you get a job Spicoli?
Jeff Spicoli: What for?
Brad Hamilton: You need money.
Jeff Spicoli: All I need are some tasty waves and cool buds, and I'm fine.

-- Fast Times at Ridgemont High

 

 

As always, hanging out with Melissa, Karen and the boys on "Fast Money" was "Awesome! Totally awesome!" (Spicoli/Sean Penn).

Melissa started by asking for my market view and then for a peek at some of my surprises for 2011.

I remain less certain than most that the domestic economic recovery is headed on a smooth path toward profitable and self-sustaining growth -- conditions that seem to be needed in order to ratify the market's rally since late August. As I mentioned a couple weeks ago on "Fast Money," the market has likely topped for the year despite the nice rally yesterday from the lows on Monday.

The necessary ingredient to a continued market climb and to the restoration of self-sustaining growth lies in the hands of our fiscal authorities, not our monetary authorities.

Neither Republicans nor Democrats appear to be moving to the center, and gridlock is the likely outcome. Accordingly, we are not going to see the sort of intelligent, transformative and focused fiscal moves directed at job growth that are needed.

Guy "Spicoli" Adami asked me for a specific market forecast. How long can it go? No Cassandra, I am respectful of Mr. Market, and I recognize the historic seasonal strength at year-end that could serve to buffer a drop. Mindful that I have been premature in predicting the market's demise, I nevertheless stand by my statement of early November that the S&P 500 might have peaked for the year.

The next question Melissa asked was for a peek at some of my Surprises for 2011. She noted a prescient call I made a year ago regarding a wide-ranging SEC investigation into insider trading, which was revealed this past weekend.

I framed the answer to her question by saying that every year I take a page out of Byron Wien's playbook. (I have been doing this for seven years, and Byron and I enjoy jousting and seeing whose list is ultimately more accurate.) The real purpose of the exercise is to position a portion of one's portfolio for some outlier events or "possible improbables" in order to generate alpha, or excess returns.

Surprise No. 1: I expect a series of populist initiatives by the current administration beginning by a frontal assault on mutual fund 12b-1 fees. The asset managers -- Franklin Resources (BEN), T. Rowe Price (TROW) and Waddell & Reed (WDR) -- are exposed, and I am short all three of them.

Surprise No. 2: The Internet becomes the tactical nuke of the digital age. Cybercrime likely explodes exponentially as the Web is invaded by hackers. A specific target next year will be the NYSE, and I predict an attack that causes a week-long hiatus in trading and an abrupt slowdown in domestic business activity.

Guy asked whether the May 6 flash crash was "a shot across the bow." I responded that our reliance on the Internet is profound. The May flash crash seemed to have been caused by a confluence of unrelated events, but our markets very much remain vulnerable to Internet attacks and, in the extreme, to terrorist attacks.

With that holiday cheer (hat tip to the Divine Ms. F., Karen Finerman), like Warner Wolf, let's go to the tapes