Arrogance

So much for the "sell the news" trade. I was watching BNN just as the fed made its announcement regarding QE. They had a few guests giving their take about it. 2 of them were bears one was moderately bullish. One of the bears talked about how we're going to be in the "new normal" of subpar growth for most of this decade (such an original thesis eh?) and how QE wasn't going to make a difference. The other bear was a frustrated floor trader who claimed how all this fed intervention is creating inflation via rising commodity prices and it's all going to end badly one day. What I found interesting about these guys, which is also common amongst today's bears, is the hand wringing, arrogant attitude they have. Bears have been dead wrong about the market to the point of embarrassment and instead of being humble; they dig in their heels and continue to talk tough. Anytime you see this type of behavior you know Mr. Market hasn't finished humiliating them. At what point are these clowns going to say "hey you know what I was wrong about the market". The retail shmucks who worshiped them are slowly but surely learning the hard way that most of these permabears are nothing but broken clock, arrogant pricks who will never admit to being wrong. They are no better than the "new era" permabulls who rode the market down in 2001 and 2002.


I want to say something about QE. Everyone is harping about how this is bad because the fed is "printing money" to buy bonds. This is not entirely true. People forget about the flip side to this equation. Eventually the fed will SELL these bonds back into the market thus "destroying money" in doing so. So, in essence what the fed is doing via QE is manipulating the mix of cash and government bonds held by the public. They are not creating new money on a long run basis because like I said, they are going to eventually reverse QE by selling back those bonds. But of course, a lot of people don't seem to or want to realize this. They just want to bash the fed no matter what.

Also, everyone keeps moaning about things aren't getting better, how unemployment remains high calling this a jobless recovery and that the fed is "pushing on a string". Guess what? I heard the exact same arguments in 2003! Eventually the jobs DID come and the fed's actions WORKED...it just took longer than normal and all along the stock market was making new high after new high signaling that things were going to get better. It seems that a lot of people out there don’t want the fed to succeed...they would rather see the economy collapse again. They say it's for everyone's own good to let "nature takes its course". But do you want to know the real reason why most feel this way? Ego. They bought into the doom and gloom hype after getting burned as bulls at one point in their life whether it was the tech crash or the 2008 crash. Now, as bears they are getting burned again and they are in denial just like they were when they were bulls. Its bizzaro 2001 folks!

Another bs thing I keep hearing from the retail shmucks is "the bull market is an illusion because gains in the stock market are only a reflection of US dollar weakness, so there's been little real gain." First of all, the dollar has dropped about 23% since the bull market started but stocks are up 75% therefore there is still indeed a "real gain". Second of all if this logic holds true then it must mean that countries that have seen their currencies rise must have an offsetting declining stock market. Well that hasn't happened. Countries that have seen currency strength have also seen soaring stock markets greater than that of US. So, the truth is that huge wealth has been created worldwide using whatever currency you want to measure it in.

Pretty much every major index in the world has hit fresh 2 year highs today. Overbought or not, this tells you the bull market is in full force. It seems quite unlikely with only 2 months left in the year the market is going to slip up in a big way before 2011. But given how overbought we are now, we will likely see at least some sideways consolidation in the coming weeks and yes, perhaps even the correction that so many people got burned trying to capitalize on. But you know what I always say, picking tops is dangerous game when a market closes right at a fresh multi year high because in such case it's very unlikely the market has seen its highest point, dip or no dip especially when most of the retail shmucks out there are still miserable and mom and pop investor is still MIA.