The individual investor hasn’t returned to the stock market.
Careful wise men and reckless fools permeate in and out of the market. Wall Street, the Indian giver, gives and takes away. Millions of past individual investors are incapable of forgetting their prior foray and blunders in the market in the past decade or so and no longer ‘play the street’. They have no linger to learn from the recognition of their mistakes. An avalanche of sell orders on big panic market days, economic fears, the plunge during the housing crash , the attack of 9/11. the internet debacle in 2000, and the financial crisis sways into the latest fears of Europe issues, fiscal cliff, world wide debt and recession.
The ongoing ’doom and gloom’ predictors, the failure of ’get-rick’quick schemes, the ponzi schemes, the failure of media analysts, all lead to a public no longer swayed to investing in the stock market.
The wise investor realizes that it is no longer possible to consider the stock market as a whole. Today’s stock market is too vast, too complex for anyone to make sweeping generalized predictions about the course the market as such will follow. The wise investor now comes to the conclusion that in a highly sophisticated technological computerized market, it is still the emotional nonprofessional investor who sends the price of a stock up or down in sharp sporadic and more or less short-lived spurts.
Today’s stock market moves too fast, too quick. It is akin to getting into a car and fasten your seat beat and making sure you have a crash helmet on. The market is too scary! The market is ongoing with constant uncertainty. Any world event affects it, whether a china slowdown to an earthquake, to crop failure in Brazil, to a tiny country economic problems, anything and anytime it can affect Wall street.
There are those who feel comfort in company fundamentals, manifested by a multitude of ratio numbers made up by faulty assumptions. There are those in believe in the religion of stock screening and back testing. The error in backtesting is believing that past performance is a precursor of future performance. There are others who indulge into voo-doo technical indicators and take comfort in their strange sounding names. There are those who have faith in oriental candlestick chart symbols with weird foreign names. There are those who live by sentiment surveys and chart waves. There are the naïve who still listen to free media analyst reports. There are those who go by ‘gut feel’. There are the day traders, the gunslingers, and the long term buy-and-hold players, the swing traders, the electronic traders, the short sellers, the hedgers, the mutual fund and etf gurus.
However one item stand out. There is one factor that provides truth against the incredible network of gibberish, bluffs, fibs, lies, and nonsense.. It is what the market actually does. The past is dead, it is the analysis of the present. It is not the noise, it is the signal. IT is call Market Reaction! …Let me repeat..MARKET REACTION...what the market actually does!…and it is bothersome! The market has been taken with a couple of major positives of late.
Two items of ongoing , long term concern…that is the job numbers and the housing numbers …AND BOTH OF THOSE NUMBERS have been good in recent days…
YET the market reaction has been HO-HUM!
This is NOT GOOD !
POOR MARKET REACTION TO GOOD NEWS IS NEVER GOOD! One needs to take note. Just a warning!