Charting A Ridiculously Extreme Market, In Which The Dumb Money Is The Most Confident It Has Been In 5 Years

Tyler Durden's picture

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FunkyMonkeyBoy's picture

This time it's different!

MR. GLASS's picture

 “As long as the music is playing, you’ve got to get up and dance,. . .We’re still dancing.”  - Chucky Prince

Tense INDIAN's picture

"Chuck Prince said that you have to dance until the music stops, actually the music has stopped already"---George Soros (The inside Job)

Ludwig Van's picture


Tell that to First Violin Ben over there.


homersimpson's picture

I guess by the above definitions, Harry Wanger is classified as dumb money (but we knew that already).

HarryWanger's picture

Rather be "dumb money" making nice returns than "smart money" losing their asses digging for any morsel of data mining to make their case for a pull back. Right, Nic?

tmosley's picture

He's up until he's bankrupt...AGAIN.

4xaddict's picture

only nice returns when you've banked them Harry! If you have though, congrats! Can't say I share your overall bullish attitude but if you can get in and out without getting your ass burned then good luck to you!

MarketTruth's picture

Just buy the fuckin' dip! Are you stupid or something, just buy the fuckin' dip!!!!!!!!!!

BotanyBabe's picture

Can BroccoliMan stop inflation in 15 minutes?

I Am The Unknown Comic's picture

you betcha! ...and with 100% CONfidence

redwraith's picture

Would I still be considered "dumb money" if I side with "dumb money", but make money anyway?  Or would that make me "smart money" being able to play with "dumb money" and still be profitable?

It's probably just dumb luck.

I Am The Unknown Comic's picture

....hmmmm.....maybe you're not as think as you dumb you are

no life's picture

When this is all over, a T-shirt shall be distributed to all citizens.

We got that going for us, which is nice.

tmosley's picture

Yup, we all get to share one t-shirt.


total nonsense's picture

I wonder if anyone is noticing all the "special" cash dividends being paid out so insiders ca cash in before either #1 the tax laws change or #2 the easy money days are over. The great ponzi scheme continues. Thank You Ben Bernanke for bailing out the Rich

rocker's picture

Isn't that who the FED are. The rich elite bankers. Who would expect anything different. Rinse and Repeat. 

Sudden Debt's picture

It looks like the banks might indeed push the markets higher this week.

BAC and C both broke resistance levels and could now go another 5 to 10% higher these next 2 weeks. And those 2 will lead in volume and push all the markets up.


Ferg .'s picture

Very insightful information . Merely solidifies my opinion that we are about to see a fairly deep decline in equities ( only question that remains is if it will begin before Christmas or at the start of 2011 ) . I've been reading nothing but positive articles about stocks . As a contrarian this , plus the slew of bullish sentiment data ( to say nothing of the awful awful state of the US economy ) , is a clear signal to prepare to enter a few shorts . Of course given the fact that this is a market glued to an upward bias , you can never be sure ...

Chartist's picture

There seems to be a contradiction here.  How can money continually be pulled out of funds by retail investors (read dumb money) yet the current environment indicates so-called dumb money shows highest confidence level in last fiver years.

hambone's picture

I don't think money is being pulled due to lack of confidence...I thinks it's a lack of money!  Folks out of work, folks working but not contributing, and folks in retirement starting to pull.

Adds up to outflow.

Paladin en passant's picture

Two different sets of folks.  Fund buyers are trying to sock away some bucks for retirement, kids college or that dream vacation home in Belize.  They wouldn't buy an option if you paid them to take the risk. Small-lot option buyers believe they are the next George Soros or Jesse Livermore.

I need more cowbell's picture

Excellent comment, made me think. I think J6P is out and on the sidelines pretty much for good, so the dumb money has to be the remaining few, who are traders anyway and not buy and hold mutual fund owners.

My take for what it's worth.

TraderTimm's picture

For now, my prop indicators say higher. Of course, the corollary is when they do not. I very much look forward to a proper decline. Devil is in the details, after all.

Apart from Reality's picture

The Fed money is definitely buying, not sure whether that is best described as Smart, Dumb or Dumber.   It is certainly skewing all the normal indicators though.

Ludwig Van's picture


We're in the cartoon phase of blood, famine and plague.


Dismal Scientist's picture

The Bernank put will work, until it doesn't. As always, diversification is key, which means own physical assets as well as paper assets. What percentage mix works for individuals is their own concern. As long as the Fed (dumbest money of all, were it not for the fact that its taxpayer money, so yes, its still the dumbest money) props up paper assets, then expect to see continued new highs in equities. Most of the strategy pieces I have seen for outlook 2011 say 'switch into equities from bonds', this is fast becoming the new consensus.

Its a liquidity driven environment still. Play at your own risk...

Joesmoe's picture

WHo in the world knows.


I am betting on a correction when the next round of politicians step in mid January.

RobotTrader's picture

Tough call.  Seems like when we reach these levels in sentiment, the market is ready for a quick drop, just when everyone leasts expects it.

But we also have some key big caps breaking out, showing signs of strength.


David White talks about the "once in a lifetime opportunity" to buy puts in the options market:


O'Brien has been calling for a crash to SPY 825 for over 3 months now:


Kaltbaum disagrees.  Says market is due for a correction, says he's getting flooded with e-mails from guys
who want to short.  But doesn't see any real signs of a major drop or signs of market weakness yet.


Spalding_Smailes's picture

--- ( CHNG ) ---

--- ( BJGP ) ---

--- ( NPD ) --- China Nepstar Chain Drugstore Ltd.- retail drugstore chain in China store network was comprised of 2,479 directly operated drugstores the Company had developed 1,524 private label products.( $ 3.47 )

DoctoRx's picture

Not a junkable comment from Robo IMHO.  Lowry's increasingly bullish.

On the first chart re dumb/smart $$, it looks as though "dumb" money was much smarter than "smart" money all throughout 2009, and at other times.  

I'd prefer to look at the fundamentals rather than try to discern who's thinking, saying or doing what.  Ultimately the only thing that matters is price.  And, e.g., AAPL and HP (not HPQ) are solvent and thriving, whereas the govt is not.  So, $$ does have to go somewhere . . .

Trifecta Man's picture

Traditional support for the bear case also may include the Investors Intelligence Bull/Bear Sentiment Survey,

For some perspective, click the 2 Years link.

The wide spread of Bulls over Bears also can be taken as a contrary indicator that the Bulls are fully invested.

Without the Fed's easy money, the stock market would ordinary be a high risk proposition at these levels.  But since the easy POMO money is a given, it matters what assets will attract the future money.  Bonds are sinking in price as interest rates go higher.  The JP Morgue has yet to capitulate, so gold and silver may still attract more money.  Cash may be okay because the dynamics for the euro suck.  Commodities are still a preferred play.  No slowdown there with all the money printing around the world.  Then there is stocks.

My guess is that we see more sector rotation in stocks, not a crash just yet.

Ludwig Van's picture


If the Bernank stands as a proxy for *Brilliant* Money (BM, aka Fat Boys), i.e. smarter than Smart, then the acts of BM (who wants it *all*) expresses there's still more out there to suck up. The retail trade means nothing anymore, and hasn't for awhile. But the commercials, the original Smart Money standard -- those guys still have something. Six months or a year (or whatever it takes) of POMO to lure them out is small price for big game, especially if you can take over their turf.

The best way to get to a guy is to fuck with his head, make him think he's going nuts, or goad him to trespass against his better self (cf. Winston Smith). These strong, if sub-elite, investors, underwriters and market makers constituting Smart Money represent the thinning wire strand of substance remaining in this nation, proxy for the middle class, meaning the last and most formidable barrier to the Fat Boys getting it *all.* Therefore they've got to go.

At cartoon extremes of market contortion, where bad news brings rejoicing for increased welfare, and good news is a bummer because in a healthy recovering economy I'm gonna hafta go back to work; when down is up and wrong is right (those rich lying bastards are surely blessed!) -- what place does due diligence, technical analysis or market sentiment have in that world?

A simple ambush won't work on Smart Money; they're ready for that. But a slow, steady grinding down... or up?

Dow 20K, S&P 3000, Nas 10K -- why not? I mean, if you're gonna crash the bus, buddy, don't run it off the road, but off a cliff.

You see, just as the Fat Boys (aka BM) have had us occupied all along in dualistic Democrat-Republican spats, so that worked so well for so long we'll start seeing that principle applied in all kinds of ways, i.e. Smart Money-Dumb Money.

*Illegitime carburendum.* Don't let the bastards grind you down.



something fishy's picture

How does this mesh with the continuing retail outflows from equities? Also,

it looks like the 'smart money' was way too bullish throughout 2008, more so

than retail. It seems like 'smart money' isn't that smart after all.

Dinghy Dumper's picture

"changing the laws of thermodynamics is one field where Bernanke will fail"

Thermodynamics indeed !

Whenever one relies on an exponential growth function that ultimately has to couple to actual mass and energy flow in any system (a.k.a. "the real economy") the system has to crash.

See e.g., here for a nice little take on that.

TheGreatPonzi's picture

The men who shorted the Zimbabwean stock market went broke.

It will be the same here. If investors sell, the FED will buy.

Do you seriously think the FED will accept a stock market crash?

erik's picture

They didn't stop 2008 crash from occurring.  Or are you saying that they will not allow any future stock market crashes?

The stock market is less important to the Fed than the bond market.  If it weren't, the Fed would be purchasing stocks and not bonds with QE.

Isn't Zimbabwe a poor example?  The US has debts denominated in its own currency, Zimbabwe had debts denominated in dollars so they had to print their own currency to buy US dollars.

badnews...buyspus's picture

They DO buy the equity market everyday - they just don't and won't admit. Not only do they buy SPY outright but they also have their big 5 banks buy with the money they funnel through daily (QE). The equity market is their focus as they believe in the same bs of trickle down economics.