There Is No Glory Left
What we have on our hands with this buy at any cost, early 2018, stampeding bull run that is already taking out some analyst's year end targets is a "me too" trade at its purest. Whenever the calendar turns a few funny things happen to investors: Those who won last year don't believe they can lose so they hold off on doing any selling. Those who lost last year don't believe they can handle another year of losing so they start buying consensus driven winners from the year past. Those who did neither, in other words, sideline money, believe that since a new calendar year has arrived, they must get into the markets now before analyst projections of a market that is 15% higher by year end come to fruition. And so we arrive at this point right here, right now. The S&P 500 hit 2759 today because investors both retail and professional don't want to be left out from another year of stupendous, mind-eviscerating gains. The peer pressure to create gains on capital by taking on what are extraordinary levels of risk has not been at these levels since 1999. The crypto and FANG generation is beginning to become grounded in the fact that they deserve extraordinary gains by investing in technology innovation simply because they are intent on uprooting the establishment, and these investments symbolize that intent. What is forgotten in the midst of any greed driven run is that markets function on manipulation. Trends are created to be tested. Investor psychology is molded in order to be torn down. Capital is shown a path towards generous returns only to see that path takes twist and turns nobody would originally expect. All of the devious behavioral traits of the markets are currently lying in dormancy. Simply because they haven't shown up for an extended period of time only means that when they do, the force exerted on the downside could be much greater than most any investor is currently prepared...
Fighting The Suck
Powerful secular bull markets will always have a group of esoteric, less than understood assets that capture the hearts of investors, causing ascents in price that sing to their souls. At some point, and we may getting close that point now, it becomes impossible to fight the suck. Smart money, dumb money, family money, institutional money, international money and even loose change in the cup holder get sucked into an acceptance that "I can only win and will never lose." Investors finally succumb to the song of the markets when not only are their friends and neighbors killing it in the markets, but they see many so called "smart money" investor types substantiating that tingling feeling they are getting in their nether regions. And that's the suck that proves irresistible: Individuals can maintain perspective on risk when their friends and neighbors are making money, but lose that perspective when individuals they regard as "smart money" substantiate how their friends and neighbors invest. With that twist of popular opinion comes all types of asset allocation decisions that are viewed in hindsight as reckless. Greed is created through consensus opinion that evolves along an ascending intellectual framework. In other words, it spares nobody in how powerful the suck of capital is towards a particular group of assets. The fact that it is ascending and not descending makes individuals feel that they are making a prudent decision simply because smart money corroborates their behavior the more reinforced a trend in the market becomes. While this bull market still has years ahead of it, there are asset allocation decisions that are being made currently based on a less than well thought out thesis created simply because friends and neighbors decisions are being substantiated by individuals regarded as being bright. Fight the suck....