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Market Musings: Oh, the Horror!

I woke up this morning to a headline in the Wall Street Journal: "Futures Down: Markets to Suffer First Losses of the Year". Oh, the horror! Is there too much riding on a higher stock market such that every little wiggleand waggle becomes a moment of grave concern or jubilant euphoria?

Listening to the Bloomberg radio on the way to the office you can hear the concern of the show's hosts as European markets were dragging down the early morning futures here in the US. Thank god, we had the ADP report, which is a useless and unreliable data point, to spike the market back in the other direction.

Why do investors fail? They don't think for themselves. It is easier going with the herd then standing off on your lonesome. There is safety in numbers. And if the herd fails, well you can look around and think to yourself "well I am no better than the rest of them". It is uncommon that the common succeed, and it is common that the uncommon succeed.

Of course, we don't want to be reckless and contrarian for the sake of being reckless and contrarian just so you can stand out from the crowd. Pick your spots and know when you are wrong.

The best thing about employing a strategy that utilizes investor sentiment is that it forces me to make investing decisions that are outside the consensus and herd. This doesn't mean I am always right or the herd is always wrong, but I think it increases the chances of being successful when navigating the markets.

Is the US decoupling from the rest of the world? Has the US become an investor's safe haven? These are the questions that media outlets are trying to answer as stocks march higher on seemingly meaningless volume.

And speaking of market volume, where was yesterday's volume? I guess the institutions didn't get the message that they needed to be buying because it is the start of the new year. Yesterday's volume on the S&P Depository Receipts (symbol: SPY) was equivalent to December 29, 2011. That is not good.

So back to those rallying points -- you know, money is flowing out of Europe (i.e., train wreck) and China (i.e., hard landing) and into the US of A because we are a stable, safe haven. The last time I heard about decoupling was when growth in China, which was unlimited, was suppose to pull the rest of the world up. How did that thesis work out for you?

Decoupling? Whatever happened to the interconnectedness of the global economy?

From a market perspective, I think we are at one of those inflection points. I read stories yesterday of break outs and other such nonsense. The market is doing its best to sucker you in. If this is the "big one, Elizabeth", there will be plenty of time to jump on board.

I just read that the American Association of Individual Investor (AAII) % bears is at 17.16%. That is awfully low. The last time it was this low was the first week of January, 2011. How did that work out for you?

 

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