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Guest Post: “Only Thing We Have to Fear Is A Lack of Fear Itself”
Submitted by Peter Tchir of TF Market Advisors
“Only Thing We Have to Fear Is A Lack of Fear Itself”
After 6 weeks of steady decline in the stock market, what
amazes me is how little fear there really is.
Investors do not seem concerned.
I have lost count of how many people have pointed to the VIX
as an indicator the market is in okay shape.
There may have been a time where there was empirical evidence that the
VIX was a leading indicator. As far as I
can tell, it is now just a coincident indicator and is part of the risk on/risk
off trade. If you look at stocks, oil,
Eur, and VIX in the morning, all you need to do is look at one of those in the
afternoon, and you can probably come pretty close to guessing where the other 3
markets are. That is all the evidence I
need to decide that VIX is no longer a leading indicator. I have heard the smart money now looks at
forward implied volatility or volatility skew as a better predictor of future
market moves. Those sounds confusing
enough to me that they may work, but the VIX, in my opinion has little predictive
value, and if anything may be a good contrary indicator. It seems to me that VIX gets very low before
big corrections, and VIX gets very high before big rallies.
Speaking of contrary indicators, even Alan Abelson took the
time to point out that the American Association of Individual Investors had
turned decidedly bearish, which is a contrary indicator. Again, maybe that has been the case, but for
the past 6 months, investors seemed to time the market pretty well. They turned bullish and the market continued
to trend higher. They became bearish and
the market started to sell off. The
timing has not been perfect, but it doesn’t completely support the assumption
that is a contrary indicator. Once
everyone knows about a contrary indicator, does it remain a contrary
indicator? Maybe it is the fact that
retail is now so irrelevant to the market, that their sentiment doesn’t
matter? Or maybe it is because the
internet has created a greater bias to the survey than it had in the past? In any case, it makes me nervous anyone who
comments on this number is convinced it is a contrary indicator.
I hate to bring my mother into it, but even she is asking if
she should buy at the 200 day moving average or buy a bit early in case it
doesn’t get there. It is getting hard to
type because of that annoying noise made by trucks backing up to load up on
S&P 500 here at the 200 DMA. Maybe
it will work, but it seems like too many people are thinking the same thing for
it to be a good strategy. The people I
listen to on TV seem supremely confident that we have strong support at the 200
DMA and are looking forward to buying stocks there. Again, where is the fear?
I have head the “stocks climb the wall of worry” trotted out
a few times, though less than I expected.
Sadly, the people who like this cliché don’t really seem worried, they
just like to point out reasons people could worry. What worries me is how many analysts get
something completely wrong, then 2 months later change their opinion and ignore
the fact they were ever wrong. In early
May almost no one was calling for haircuts or restructuring any time soon. Now they all say there will be. How many analysts predicted that stimulus
from Japanese rebuilding efforts would be good, and now blame all their overly optimistic
forecasts on supply problems from Japan?
I have no problem with changing your mind over time, but I do worry
about a market that doesn’t worry about how good analysts have been.
Finally, the one comment that struck me as most peculiar was
Mr. Santoli, who I think is very good, trotting out “The market never discounts
the same news twice” quotation.
Seriously, that is why we shouldn’t worry? Is it that sort of thought process that let
the market rebound strongly after Bear Stearns was saved only to be shocked by
Lehman failing? Did we discount Greece
last year so don’t need to again this year?
Or was last year discounting a liquidity event and now it is a solvency
event? Of all the market slogans, this
one irritates me more than any other as it reeks of complacency and has all the
practical applications of a horoscope – you can always interpret the results to
make it seem correct.
But why is there no
fear?
I think it all comes down to 3 letter words. Mom, Dad, Fed, IMF, and ECB. Children know that their parents are there
for them, to take care of them, and to make them safe. At the first sound of thunder, a child will
look for their parent and take comfort in their arms. Little children don’t necessarily know why,
they just know that mom and dad will be there for them and will make them feel
better. The market must have that same
faith in the Fed, IMF, and ECB. Whenever
the data gets bad, the market ‘knows’ that one of these entities will be there
for them. Maybe it is QE3 instead of warm
milk, but these entities will be there to support them. I don’t know how long these entities can
support every blip in the stock market.
The real economy is different than the stock market, and all the cures
and comforts of these entities have done a great deal for the stock market in
the short term, but relatively little for the economy, and the long term
consequences of their actions are yet to be felt. I certainly don’t want a 30 year old kid
living in my basement because I made it so easy for him that he was never able
to go out and do it on his own. At some
point the Fed is going to have to kick some birds out of the nest and see if
they can fly on their own. In the meantime,
the market clinging to hopes that its parents can take care of them runs the
risk that the problems are just too big to be dealt with easily and
quickly. Then we might get some real
fear in this market.
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Reality is about to set in.
By then, it will be too late.
Nah, they know they got big problems. I'd say its 33% arrogance that somehow they can fix it/ 33% denial, with 33% stupidity, with the slim sliver of the remainder grimly embracing the Deep Impact comet movie scene, waiting for the inevitable, somehow hoping its not as bad as they think it will be.
If we get to 1250 today, it's gonna be fireworks. They shouldn't have chased out the shorts yesterday.
Actually the only thing we have to fear is the FORT CALHOON NUCLEAR POWER PLANT!!!! NOW A LEVEL 4 EMERGENCY!!! SAME AS FUKUSHIMA WAS!!!
http://fiatsfire.blogspot.com/2011/06/meltdown-wednesday-greece-at-level-7.html
The sky may be really falling or at least starting today!!!
P.S I am back from weekend vacation!!!! reading updates!!! I will write my findings later!!!
http://www.youtube.com/watch?v=ySztL6kBw-M
Does nobody live near the Missouri river?!?! Hello people!!!
http://www.youtube.com/watch?v=LR8dlcI49X8&feature=related
People of the Mid-West... the Nukes are coming to you! som much for being safe from the crowds in the middle of no-where!!
http://www.propublica.org/article/electrical-fire-knocks-out-spent-fuel-cooling-at-nebraska-nuke-plant/single
A fire [1] in an electrical switch room on Tuesday briefly knocked out cooling for a pool holding spent nuclear fuel at the Fort Calhoun nuclear plant [2] outside Omaha, Neb., plant officials said.
The safety of deep pools used to store used radioactive fuel at nuclear plants has been an issue since the accident at Japan's Fukushima nuclear plant in March. If the cooling water a pool is lost, the used nuclear fuel could catch fire and release radiation.
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> Event Notification Reports > 2011 > June 15
Event Notification Report for June 15, 2011U.S. Nuclear Regulatory Commission
Operations Center
Event Reports For
06/14/2011 - 06/15/2011
** EVENT NUMBERS **
46938 46944 46945 46946 46948 46957ALERT FOOTAGE OF LATEST FLOOD LEVEE BREACHES, IOWA, MISSOURI Nuclear Danger http://t.co/MLbkrZb via @youtube
Holy crap, people! You're scaring the hell out of me.
Yeah, I live near the Missouri River. Well actually right between the Missouri & the Mississippi.
What's up with the engineers and planners on these things? They build nuclear power plants on "the ring of fire", on fault lines and in flood zones and then don't have any adequate safeguards against massive catastrophe if anything happens to go wrong, or as this engineer said, "If nature throws us a screwball." Like maybe a flood, or earthquake, tsunami or tornado? Umm, hello, isn't that a part of the game? Are screwballs outlawed in baseball? Did they outlaw earthquakes or tsunamis in Japan?
I want my mommieeeeeeeeeeee.
Well, at least we have the Fed & the IMF to save us on the economic front.
normalcy bias bitchez!
NO fear!? well maybe...
But I guess there will be a sad day when everone understands what huge risks they've been taking, it'll be too late. Many suicides will commence.
Jump!
.
I'd just like to go on record saying that I'd rather prefer people not to jump. Even bankers. My impression is that it'll come to that simply because the illusion is so powerful. It's a sad state of affairs in the so called civilized world.
And yet, even when the sheeple realize that governments do not care about them, they will still cling on to denial.
Men are infinitely malleable.
baby owls can imprint themselves on human handlers...it is in the nature of children to trust even when not rational
I believe the condition is called Stockholme Syndrome.... the sheeple want to believe their rapist is a good guy!
I was in RI ovet the weekend and I have never seen such ghettos and trailer homes. Every corner there was one. RHODE ISLAND looked like HAITI!! WTF?
He he
Trailers aren't just for the south anymore.
We prefer to call it modular portable housing anyway.
So not nearly the paradise that is Detroit, Harlem, Watts, etc ...?
Becuase they don't understand the system (central planning, socialist transfer payments) is what is fucked up. Mankind does not have the wisdom to make it work. This is why our founding fathers in the usa tried to limit government. Government eventually fucks up everything if it is not kept small and powerless.
However the sheeple think that the failure was caused by the current politicians not the system itself. Sheeple set themselves up for repeated failures and misery since they reject the nihilist politician and will repeatedly vote for the charlatan who promises he can make big government work.
The fact that it has never worked before doesn't cause them to question the system.
The timeframes are too long for experience to lead. And history is rewritten as needed to obscure.
It's sad that so many people seem to understand the problems and can articulate them so and even the solutions so very well and yet everyone seems to be powerless to do anything to stop the carnage.
Yeah... it's tough to stop 300 million suckers who've been told there's free beer in the next room.
The FED and IMF are mom and dads who are child molestors
That begs the question are people better off as orphans or does the paternal/maternal Entity keep on daughter-diddling?
See: Lizzie Borden or Lyle & Eric Menendez
I see what you did there... clever. so murder, something to look forward to!
Lizzy Borden had an axe
She gave her father 40 whacks
and when she saw what she had done
she gave her mother 41
was it here that I saw an article about low vol because so many mkt particpants selling calls to generate income drives down the price of calls (and with it vol, or std dev, an input in black scholes goes down as well). i forget, i read too many fin and mkt blogs
Look! In the sky! It's a bird! It's a plane! No....it's.....a Black Swan! OH DAMN!
I found a good way to explain to people what's happening and going to happen.
ADD a little upside in the story!
I always begin like this:
Remember how our parents where able to buy such big houses in the 70's and 80's?
The reason was because their wages suddenly popped 300 to 400%.
It was all because of inflation back than and...
Believe me, you've got everybodies attentions with a starter like that.
Bernanke is currently in the fetal position right now crying for his mother!
Wile E Coyote has no fear!......Until.. that.. moment
"The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks."
-Lord Acton (1834-1902)
Gold hanging on as the market takes a dump. That isn't supposed to happen during a deflationary stock environment, according to some.
FED still printin - check.
ECB bullshit liquidity programs still printing - check.
Ummmm what deflation?
Till someone defaults and bank capital and assets go whoosh we still have plenty liquidity.
In a deflationary episode, people will abandon investment assets and rush back into Money. The gap in the dollar deflationists' logic is that they fail to recognise that Gold is, and has always been, Money. Not currency. Money.
Bingo.
Gold is at $1520/oz. So you expect gold to be worth more in the next 3-6 months?
Dr. Yes
..and short-term oscillation matter why?
Bingo+1
SNAP Safety Blanket = As soon as thats gone, or people become 99ers - then watch the fear roll
@#$%
the only people still sucking off mommies tit are the dirt bag bankers who have screwed everybody.
Fear this, i'm serious.
http://www.youtube.com/watch?v=ySztL6kBw-M
A comparison of the market to kids and the IMF, ECB, and Fed as loving parents who make the market feel better? What a turd of an analogy. Come on.
This analogy doesn't work. The Fed and IMF have manipulated the market not to feed the "kids" but to eat them instead. The people who trade in these comodities have had to adjust to these tyranical overlords so that they can survive. They've done their best to predict these overlords and now your point is that the overly benevolent IMF and FED should go on a shooting spree?
I don't think so.
At some point, all tyrants get slaughtered. That is the happy thought which should be racing through the minds of FED and IMF directors.
This analogy doesn't work. The Fed and IMF have manipulated the market not to feed the "kids" but to eat them instead.
Yeah. I can totally see The Bernank dressed in a witches costume inviting unsuspecting kiddies into his gingerbread house. Only in his case the house is made of green paper pieces, rather than gingerbread.
Thanks. I simply had a brain-fart when reading the child-parent analogy. It threw me for a compete loop. The market is nothing more than a conduit through which the banks are enabled and current fiat system is extended to it's maximum possible wealth extraction.
I've been scared for decades! Some indicator...
But, even a broken clock is right twice a day.
Or would that be a busted bearing doesn't work anymore?
This is actually a pretty good article, especially the last paragraph. When are we going to get the TBTF and just about everything else, off the government/fed tit? because really its the taxpayers tit. Lanolin anyone?
Deflation happens but not to FIATS. We have been in a period of deflation for decades, once you realize that gold and silver are the real money.
I don't care what they do anymore. It's all coming down.
Correct.
Best be prepared. If you do not own Au and/or Ag and/or Pt, best get started ASAP.
Consider buying guns & ammo (while you still can?) as well as other survival gear.
Yes, but but .... whatever!!!
"QE3 Will be here to save us soon!! ... Right?"
"They have to, they just have to print! ... Right?"
"Without printing we all die, so QE3 is 100% sure, in whatever form, it will come and it will come soon! ... Right?
People who really think that the FED is so powerful that it can influence all markets all the time, you really should wake up. The only thing that the FED can do is improve confidence by making it look like they are in control. However, this is NOT the case. If confidence is lost, they are powerless and S&P 500 will hit 500 in no-time
Has anyone surveyed the computers for their market bias...because that is all that really matters..lol ???
Luving these $ swings in TNA today.
Vlad loves swings in T&A, too.
Well said. Good post.
http://tickerforum.org/akcs-www?singlepost=1063193
Things get turned upside down?
BTW, is the NDX looking like it wants to bungee jump from the 200dma?
It's really scary that I am afraid of the fear of the lack of fear.
Is there a phobia for that?
That title sums up my thoughts EXACTLY! We're about 600 yards from smacking into the iceberg, and NO ONE is paying attention? Politicians are bickering over what songs the band is playing in the ball room and demanding that everyone receive free drinks.
"But why is there no fear?"
Plenty o' fear at the Ergo's home. We've deleveraged to the hilt, and stocked up the family farm. Our biggest fear now is being cash rich when the dollar fails. Hard to navigate these waters. Whether the hyperinflation chicken comes before the deflationary egg, I can't say. But I'm convinced that central planning by idiots, sociopaths and crooks is bound to be a disaster.
Fear at Ergo's home. Check
Deleveraged big time. Check
Stocked up family farm. Check
Cash rich. Check
Ergo's family is going to be OK. Good for you.
+ $1530
Thanks. The time to prepare is BEFORE the possible disaster strikes. Not many people want to hear that. It's taken a while to convince immediate family. Thank God for giving us time.
Meanwhile, I've spoken to Ukranians who went through the collapse of the USSR and its currency. We ourselves fled New Orleans with Katrina bearing down on us. And now we're watching Japan's troubles. The usual state of world history is chaos. People are crazy to think nothing will happen.
I converted 80% of my liquid assets to gold and silver, have a year's supply of food and wate, and am getting set to buy a firearm (SKS to be precise). All we can do at this point is brace for impact.
a 22 semi-automatic rifle, is a much more practical first firearm. and ammo, is common, and cheap.
Nicely said. And sounds like you are playing it careful too. The only thing I would add is the difference between throwing cash at deleveraging versus holding cash. With rates so low, it might be worthwhile to build cash towards whatever is needed... be it deleveraging in one shot - or throwing cash elsewhere, rather than just straight deleveraging. Hell, it could come down a choice between deleveraging and eating at some point. The trick would be to stay out of trouble until enough other folks are in so much trouble that the system is overloaded.
google trends flash crash....spiked up coming into the anniversary, but once again off the radar screen
I have a serious question:
Can the movement in the EUR/CHF and USD/CHF FX pair be regarded as the inverse of what the movement of the gold price in € or $ would be, if it was only driven by supply and demand and not distorted by COMEX short positions ?
Both qualitatively and quantitatively ?
I mean gold is a scarce resource and the Swiss Franc is too.
The SNB, after unsuccessfully trying to print like crazy and buying Euros by the boatload which now rot on their balance sheet, has now given up on that and can only watch the Franc rise with despair as their Euros become ever more worthless.
Or is this comparison too far fetched ?
1. The ability to do something that frightens one.
2. Strength in the face of pain or grief (or fear).
I love the diatribe against cliches followed by the 30 year-old in the basement schtick. Nothing like being consistent.
There is plenty of fear & suffering in the lower castes of the U.S. population. I guess the journalist who wrote this thing is just not in touch.
They don't own anything. The lower 40% of wealth-holders in the US can't affect market performance!
Heh.
Why is there no fear?
Privilege!
Economic systems of feudalism and capitalism...create poverty and scarcity while promoting privilege. [hat tip to Kropotkin and Wikipedia]
economic systems of feudalism and capitalism, and how he believes they create poverty and scarcity while promoting privilege
So there was no scarcity in communist paradises?
Everything has a cost. Too ignore cost is to eventually destroy an economy.
Complete hogwash. True capitalism creates opportunity for success for those who are willing to work and risk capital. It also allows opportunity for epic Fail for all who partake. Capitalism is not cronism, corporatism nor is it TBTF. If it doesn't look like a duck, sound like a duck, walk like a duck, it probably isn't..
Also, WTF kind of make believe links are those?
I blame the MSM for the calm behavior of the clueless sheeple (95%). I blame normalcy bias to explain the calm behavior of the informed sheeple (4%).
and the remaining 1% are soothed by hookers and blow?
There's no fear because since March '09, every man and his dog has predicted imminent doom in the next quarter and stocks have continued to climb, while the euro has stayed relatively strong. China hasn't imploded and Japan shrugged off a massive earthquake.
That's why there's a lot of complacency out there.
"That's why there's a lot of complacency out there."
Same deal after the boy cried wolf.
(THEN the wolf came.)
At ES 1250 there will be screaming...at 1200 there will be outrage....lower than 1200 Ben gets itchy 'bout QE3.
Debt will crush Pelosi, Reid and indeed DEM party.
I feel like I’m doing my share. I don’t have time to develop investing strategies anymore because I’m spending all my time trying to figure out how Wall Street is going to F%^k us all next.
I feel like I’m doing my share. I don’t have time to develop investing strategies anymore because I’m spending all my time trying to figure out how Wall Street is going to F%^k us all next.
If everyone is thinking alike then someone is not thinking
I think that was a General Patton quote ??
Love trumps fear but money is a fickle mistress
I usually enjoy Peter's articles, but the whole comparing the fed as a parent to a the markets thing has me disgusted. I guess to carry the analogy further the fed/ecb are the type of parents that have allowed the market (child) to breastfeed into their 40's and have painted a reality that doesn't exist in order to prevent the child from actually becoming truly independent and as soon as it begins to 'man' up-- the parent injects the child with drugs and threatens to kill both of them if it ever leaves.
Sounds to me more like a cult where some nutjob has many brainwashed and held captive and is molesting the children.
It's time to kick in the door and take this menace: fed/ecb/imf/worldbank cult leader out and end the suffering of so many. The real economy is in a depression while the modern day robber barons have infiltrated all levels of government and have figured out a way to suppress the peoples and eat them too.
Well, every GOOD parent knows that, sometimes, supporting your child means NOT being there with warm milk or (often the case) money. Every good parent knows that there's a time to open the front door and tell the kid, "Good luck out there." It was a sad day when my parents cut off the QE.
That's where we are as a country. Everyone who's whining, "In the end, Daddy Fed will be there with new QE" is fooling themselves. It's time for tough love as the last round of money put in our pockets by Daddy Fed (QE2) solved nothing and taught us nothing - we (investors, consumers, banks....) bitch about how worthless Daddy's money is yet we complain we need more of it (i.e., QE3).
NOTE TO FED: Open the front door and tell the children, "Good luck out there; your parents have done all they can. Convert your assets and all those shiny metal trinkets you've been hording under your bed to my good ol' cash and get ready for some tough times. We have faith that you'll figure this out." SHUT OFF THE CASHFLOW SPIGOT, DAD & MOM!!!! YOU'RE CHILD NEEDS TO GROW-UP!!
Yeah, come on Mom and Dad.. stop enabling those deadbeat kids...what are they? 8 & 10 and still living at home? Socialist bastards like you are ruining society! In Dickens time, they'd be earning their keep in the factories! Feed the weak one to the strong!!
"I think it all comes down to 3 letter words. Mom, Dad, Fed, IMF, and ECB. Children know that their parents are there for them, to take care of them, and to make them safe. At the first sound of thunder, a child will look for their parent and take comfort in their arms. Little children don’t necessarily know why, they just know that mom and dad will be there for them and will make them feel better."
Boy wouldn't that be great.
I used to wish I had a normal family. Instead of a bunch of lying theiving backstabbing bastards.
Then I found out that was a normal family.
According to Chris Titus 6O% of families are now classified as disfunctional.
THAT MEANS WE ARE THE NEW NORMAL.
Maybe that is why so many sheeple are wary, and why the actions of the little investor are not longer such a good contrary indicator.
"But why is there no fear... it all comes down to 3 letter words. Mom, Dad, Fed, IMF, and ECB"
LOL, no "God" in that list?
Commit a sin? Get bailed out with free forgiveness.
Have metaphysical angst? Get bailed out with the creation myth du jour.
Wherever there is a void in the space of knowledge that people can't currently or can't ever fill in, just insert nonsense like an invisible sky daddy texting via combustible shrubberies.
Some good points. Discerning whether a hot fever will aid a blue screen reboot, or a cold coma will advance the next dark age seems to be the challenge at the moment.
We are taking meds to ward off the fever so...
hmm we'll see
III
remember, it's a soft-patch that's Japan's fault
The stock market and currency are just as much an illusion as they've always been. The shit won't hit the fan until the USA can't buy OIL any more. Till then it's business as usual. As long as OIL keeps magically showing up, it will keep going.
Why is there no fear, you ask? Allow me to demonstrate with a Superman analogy.
*Lois Lane is saved from falling to her doom by Superman*
Superman: Don't worry, I've got you.
Lois: You've got me? Who's got you?!
*Camera pans to Lex Luthor holding Superman*
Luthor: Me (insert evil grin)
Lois: ...What?!
Superman: See Lex stabbed me with some kryptonite and it got embedded in me so I don't have my powers right now, but he gave me this cool jetpack so I can still get to work on time.
Lois: ...
Most people seem to feel safe so long as somebody -- doesn't matter who -- is there to hold their hand, even if it's someone who means to harm you or if the person holding your hand is having their hand held by someone dangerous to both of you.