Before I begin, I strongly urge especially the newcomers to this board to take the time in reading posts from certain dates and incidents on the TSPTalk MB to gain insight on how crowd and individual behavior influences investment decisions. Too many times I've seen newcomers post on the board something to the effect of "Hey I'm new, how can I get rich?", and then never to hear from them again. So much insight can be gained regarding trading psychology, asset allocation, crowd behavior, and how some members manage to keep their head and stay in the game during harsh downturns from this MB, that I would consider it an invaluable free asset to an individual looking to learn some intricacies behind the ups and downs to investing.
Something that has been on my mind is asset bubbles, and while I do not disagree we are in one right now, it's just- At what point will the masses begin to realize the concept behind an asset bubble? It's clear to the whole world right now that housing was in a bubble, but three years ago, only a few deftly made the case for a housing bubble.
Looking back over some past posts, a few of us were pounding our fists on the table over a bubble in Oil once it breached $80, then further screaming for intervention at $100. We all know the story and how long it took to break, but how much did that $140 oil contribute to the deepening of this current recession? I'd say quite a bit, even though the recession would have happened regardless of oil at $140 or not.
Point being- Volume is low on the upside because this is a study in The Greater Fool Theory. Who will be dumb enough to buy from me at a higher price? Though I did some buying outside of TSP at the lows of October/November in a few commodity producers which I still hold, I'm not too eager to do anything now besides simple asset re-balancing strategies. This is not going to have a happy ending, even for those who manage to unload at the top of the climactic melt up. We have completely sold ourselves down the river and the Fed further indicated that they do not plan on raising rates any time soon.
The money on the sidelines is another brainwashed stat dreamed up by the Mutual Fund and Pension industries. What is that stat supposed to mean? Baby boomers finally got cold water splashed in the face in October '08 and realized- Oh Shoot, I should have been in capital preservation mode my final five years of work meaning money markets and bonds. Look at the inflows to bonds this year- they are at historic levels. Boomers are done, absolutely done with the stock market. History has taught us many things and one of them is that when crowds perceive an asset to be 'low risk' and pile into it, the asset then becomes risky. I have a very difficult time believing that now is a time to buy bonds when inflows remain at record levels. Sell side analysts tell us PE's are at the historic average while perma bears tell us they are in the 150's. Somebody is right, somebody is wrong here.
Ahh, but all is well as long as assets continue to skyrocket and the Goldman's and John Pierpont's can continue to flip the "on" switch of their HFT computers with the money they borrow at -.25%. Ride it while you can, but here's the rub- The indicators that showed us things were going south last time aren't going to work this time. There is/are no silver bullet(s). As soon as the VIX became headline news, it lost it's effectiveness.
Of course, looking back, I wish I had bought Oil at $80 when many believed it was bubble zone, but hey, maybe not buying it was a smart idea. I may have fell in love with the story behind alleged oil shortages and gotten wiped out like everyone else. Maybe some day I'll look back and say I wish I would have bought more at 1000, but with many investors and blogs finally beginning to proclaim an asset bubble in stocks, it makes me think that this bubble is still in it's infancy stages. Besides, nobody has the balls to go against the crowd and tighten the spicket yet. It will only get harder and harder as assets continue to move higher and 'recovery' appears more and more transparent. Asset managers are under intense pressures from investors to continue putting money to work in high beta strategies so they can keep up with their neighbor's PIP (Personal Investment Performance). How long can some hold on until they give in.
Hang ten, but make sure you're not caught up and distracted on getting a few more feet of surf when that wave begins to crest. Still ~50% equities, ~50% G fund.
Something that has been on my mind is asset bubbles, and while I do not disagree we are in one right now, it's just- At what point will the masses begin to realize the concept behind an asset bubble? It's clear to the whole world right now that housing was in a bubble, but three years ago, only a few deftly made the case for a housing bubble.
Looking back over some past posts, a few of us were pounding our fists on the table over a bubble in Oil once it breached $80, then further screaming for intervention at $100. We all know the story and how long it took to break, but how much did that $140 oil contribute to the deepening of this current recession? I'd say quite a bit, even though the recession would have happened regardless of oil at $140 or not.
Point being- Volume is low on the upside because this is a study in The Greater Fool Theory. Who will be dumb enough to buy from me at a higher price? Though I did some buying outside of TSP at the lows of October/November in a few commodity producers which I still hold, I'm not too eager to do anything now besides simple asset re-balancing strategies. This is not going to have a happy ending, even for those who manage to unload at the top of the climactic melt up. We have completely sold ourselves down the river and the Fed further indicated that they do not plan on raising rates any time soon.
The money on the sidelines is another brainwashed stat dreamed up by the Mutual Fund and Pension industries. What is that stat supposed to mean? Baby boomers finally got cold water splashed in the face in October '08 and realized- Oh Shoot, I should have been in capital preservation mode my final five years of work meaning money markets and bonds. Look at the inflows to bonds this year- they are at historic levels. Boomers are done, absolutely done with the stock market. History has taught us many things and one of them is that when crowds perceive an asset to be 'low risk' and pile into it, the asset then becomes risky. I have a very difficult time believing that now is a time to buy bonds when inflows remain at record levels. Sell side analysts tell us PE's are at the historic average while perma bears tell us they are in the 150's. Somebody is right, somebody is wrong here.
Ahh, but all is well as long as assets continue to skyrocket and the Goldman's and John Pierpont's can continue to flip the "on" switch of their HFT computers with the money they borrow at -.25%. Ride it while you can, but here's the rub- The indicators that showed us things were going south last time aren't going to work this time. There is/are no silver bullet(s). As soon as the VIX became headline news, it lost it's effectiveness.
Of course, looking back, I wish I had bought Oil at $80 when many believed it was bubble zone, but hey, maybe not buying it was a smart idea. I may have fell in love with the story behind alleged oil shortages and gotten wiped out like everyone else. Maybe some day I'll look back and say I wish I would have bought more at 1000, but with many investors and blogs finally beginning to proclaim an asset bubble in stocks, it makes me think that this bubble is still in it's infancy stages. Besides, nobody has the balls to go against the crowd and tighten the spicket yet. It will only get harder and harder as assets continue to move higher and 'recovery' appears more and more transparent. Asset managers are under intense pressures from investors to continue putting money to work in high beta strategies so they can keep up with their neighbor's PIP (Personal Investment Performance). How long can some hold on until they give in.
Hang ten, but make sure you're not caught up and distracted on getting a few more feet of surf when that wave begins to crest. Still ~50% equities, ~50% G fund.
