Greed and Fear-Time for the market to start reversing as the last momo is long?
“There are two things infinite, the universe, and people’s stupidity”-Einstein. The markets have been grinding higher this year on very light volume. Volatility has collapsed. People have been acting in an inverse panic mood, ie people are most afraid of missing out on the move up, and have forgotten about hedging. We posted a great commentary by Hussman Funds on the drawdown yesterday.
Yesterday we also got that “famous” call from a contra indicator. “This market is going to 1500, the Economy is doing well”.
These are all classical psychological inflection points, where people’s minds start neglecting risks, and the group sees only opportunity of rising markets. Joining the bull camp over the past days and weeks, is media. We are once again hearing of green shoots, goldilocks, Dow 15 000 imminent etc. Whatever people tell you, this time is not different, as many have positions, but they don’t have a clue why they have them. Further insight on media, psychology and markets by Lance Roberts via D Short.
It’s quite amazing actually. Two weeks ago Barron’s ran the cover page of “Dow 15,000″. Over the weekend Alan Abelson ran a column titled “Everyone In The Pool”. Today, CNBC leads with “Dow 13,000 May Finally Lure Investors Back Into Stocks”.Unfortunately, for most investors, the CNBC headline is probably right. Investors, on the whole, have a tendency to do exactly the opposite of what they should do when it comes to investing: “Buy High and Sell Low.” The reality is that the emotions of greed and fear do more to cause investors to lose money in the market than being robbed at the point of a gun.
(Full article here).