Guest Post: “Only Thing We Have to Fear Is A Lack of Fear Itself”

Tyler Durden's picture

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

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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Ahmeexnal's picture

Reality is about to set in.

By then, it will be too late.

Cindy_Dies_In_The_End's picture

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.

HelluvaEngineer's picture

If we get to 1250 today, it's gonna be fireworks.  They shouldn't have chased out the shorts yesterday.

jus_lite_reading's picture

Actually the only thing we have to fear is the FORT CALHOON NUCLEAR POWER PLANT!!!! NOW A LEVEL 4 EMERGENCY!!! SAME AS FUKUSHIMA WAS!!!

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!!!

jus_lite_reading's picture

Does nobody live near the Missouri river?!?! Hello people!!!  

JW n FL's picture


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!!

JW n FL's picture


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.

JW n FL's picture

> NRC Library

> Document Collections

> Reports Associated with Events

> Event Notification Reports > 2011 > June 15

Event Notification Report for June 15, 2011

U.S. Nuclear Regulatory Commission
Operations Center

Event Reports For
06/14/2011 - 06/15/2011



46938 46944 46945 46946 46948 46957



JW n FL's picture


JeffB's picture

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.


GeneMarchbanks's picture

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.

GeneMarchbanks's picture

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.

Ahmeexnal's picture

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.

oogs66's picture

baby owls can imprint themselves on human is in the nature of children to trust even when not rational

jus_lite_reading's picture

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?

topcallingtroll's picture

He he

Trailers aren't just for the south anymore.

We prefer to call it modular portable housing anyway.


JustPrintMoreDuh's picture

So not nearly the paradise that is Detroit, Harlem, Watts, etc ...?

topcallingtroll's picture

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.

centerline's picture

The timeframes are too long for experience to lead.  And history is rewritten as needed to obscure.

JeffB's picture

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.


CH1's picture

Yeah... it's tough to stop 300 million suckers who've been told there's free beer in the next room.

Seasmoke's picture

The FED and IMF are mom and dads who are child molestors

GeneMarchbanks's picture

That begs the question are people better off as orphans or does the paternal/maternal Entity keep on daughter-diddling?

subqtaneous's picture

See: Lizzie Borden or Lyle & Eric Menendez

GeneMarchbanks's picture

I see what you did there... clever.  so murder, something to look forward to!

topcallingtroll's picture

Lizzy Borden had an axe

She gave her father 40 whacks

and when she saw what she had done

she gave her mother 41

nantucket's picture

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 

Alea Iacta Est's picture

Look! In the sky! It's a bird! It's a plane!'s.....a Black Swan! OH DAMN!

Sudden Debt's picture

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.


Eireann go Brach's picture

Bernanke is currently in the fetal position right now crying for his mother!

Caviar Emptor's picture

Wile E Coyote has no fear!......Until.. that.. moment

Atomizer's picture

"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)

redpill's picture

Gold hanging on as the market takes a dump.  That isn't supposed to happen during a deflationary stock environment, according to some.


qussl3's picture

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.

Quintus's picture

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.

Dr. No's picture

Gold is at $1520/oz.  So you expect gold to be worth more in the next 3-6 months?

Shell Game's picture

..and short-term oscillation matter why?

Josh Randall's picture

SNAP Safety Blanket = As soon as thats gone, or people become 99ers - then watch the fear roll

MayIMommaDogFace2theBananaPatch's picture

Nobody on a white horse is coming to save you.


walcott's picture

the only people still sucking off mommies tit are the dirt bag bankers who have screwed everybody.

centerline's picture

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.


Vinny's picture

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.