Main & Wall St. Moving in Opposite Directions

wall street stationOver at Bloomberg this evening, Lu Wang wrote an excellent article on the timing of entry into the markets by the casual investor, the retail buyer.

The second paragraph says it all:

Individual investors are plowing money back into the U.S. stock market just as professional strategists say gains for this year are over.

About $100 billion has been added to equity mutual funds and exchange-traded funds in the past year, 10 times more than the previous 12 months...

Screech. The Current Rally is a Year Past Expiration

One of two things is going to happen. Markets will:

  1. STOP CLIMBING, have days where there are significant sell offs and then bounce back to previous levels.
  2. CONTINUE CLIMBING, ignoring the yawning volume and moving averages, until it can no longer be sustained, collapsing into a ball of wet cheese.

Sidenote: I drafted this blog a few days back, and my thoughts tend to be supported by #1 more than ever. This was also not knowing we'd be talking about terrorism and war being on the agenda.

Just Know This

Market makers sell their wares to the retail buyer day in and day out. The zero-sum game will continue, with the retail buyer feeling the brunt. The retail buyer will ride the emotional wave to higher profits, then lose when the wave comes crashing down. It's happened many times before, and will continue to happen.

I wonder what it'll take for investors to change their ways. This sort of thing isn't ignorance. It's foolishness. At the end of the day, I suppose it's this foolishness that is required to make the markets tick.

Red skies in morning, sailors take warning.


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