A LACK OF IMAGINATION IN BEAR LAND
There's some serious lack of imagination from the financial community with respect to the markets at present. 2008 has made professional investors especially into starry eyed zombies that can't differentiate between generational economic crisis (2008) and circumstantial economic crisis (2011).
We could very well be in a renewed bear market. In fact, we may have never left bear market territory and the rally of the past couple years was just a standard liquidity driven retracement. However, the bears thinking that we are in for anything resembling the plunge of 2008 suffer from a lack of intellectual color. They see the financial world as black and white instead of a vast canvas where colors blend into each other and no two parts are the same.
I believe there will be substantial upside into October and perhaps November. September will be an up month instead of the current -5% on the S&P.
The economic ramifications of the current slowdown are being overestimated by the investment community as a result of the emotional scars of 2008. There is a "protect capital at all costs" mentality that will lead to underperformance as a majority of investors will miss out on the rally to come over the next several weeks and perhaps into year end. The panic buying that will come as a result should take the S&P 500 to around 1300 in October to possibly November.
Whereas 2008 was an avalanche to the downside. The current bear market will be choppy and extremely challenging for those who attempt to pick the low hanging fruit from the bear tree. It's a simple matter of too many investors having various stages of gloom and doom syndrome. Markets don't collapse when a psychology of this nature exists. They will instead become choppy, extract, rinse, fall rapidly, rise and then fall again. It's a stair step process that will be excruciating. It will require anticipation instead of reaction.
I wasn't at all happy with the way I played the market in August, despite seeing the downside well ahead of most. September will not be the same. I have an equal sense of conviction in the fact that we are nearing an important bottom.
I haven't allocated into any equity ETFs as of yet. I may do so during the coming week and will update once I do.
