Moving at the Speed of Fear
Another ugly week unfolds, as the same circa 1500 points on the Dow Jones criss-crosses from up days to down days.
And while the impact in the grand scheme of things is small, the dial on the media heat on the US / China “trade war" (read: negotiation) gets turned up to eleven.
We asked folks recently if they really felt deep down inside whether anyone was basing their daily lives on what China was doing.
We also suggested we keep watch on the consumer.
They seem to be doing pretty well:
- Good jobs front
- Solid incomes
- Lowest debt ratios since the early 1980s (last century)
- A small raining day fund in the bank of US $14 TRILLION or so at last count…
And then there is this stuff, where actions speak louder than words:
The fear trades are ramping, fast.
And sentiment readings are down everywhere.
In 2009, at the end of the waterfall event of 2008-2009, the Bullish AAII read was 19.7. Just last week, despite the world and the Dow Jones having moved 18,000 points higher, the Bullish AAII reading was just 24.2.
Moving at equivalent speed are bonds, but in the opposite direction, driving lower on yields as money floods into that arena and out of stocks.
Yes, these are the same bonds you were told a year ago would drive rates too high for the economy to expand any longer.
But here’s what’s actually unfolded since:
Nope, your eyes do not deceive you – these are the same rates we saw back in 2015!
Germany and Japan are negative.
It's the speed of fear accelerating through a Large Hadron Collider of sentiment, powered by superconducting media magnets through each hastening loop, and destroying common sense as it goes.
This time we’re 3,500 points higher than way, way back on Christmas Eve morning.
A Picture in Time
I’ve noted the 50-day average as an indicator of internal strife and fear in stock pricing.
Here’s the 20-year snapshot and its related extremes:
Folks, I know this looks ugly, and all the press doesn’t make it any easier.
But this is summertime…and it’s still May…with one addictive jolt of fear and angst after another, and the beat goes on.
And we can remind ourselves that it’s often quite ugly right before the gains roll into shore for those who can see through all the garbage.
And that Fear and Greed Gauge?
As it always has before in short bouts and fits of rage and angst over the latest ghost in the machine, it is working:
The comical part of all this is, of course, not that we have “Extreme Fear” ratcheting up in all the indicators, but rather the "reason" for it in the photo caption.
Just remember that the guy with the look of glazed concern on his face is an actor who walked away with paycheque after that focus and click and moment.
And didn’t they tell us last year that stocks were "falling because of the rise in yields?”
If you think I’m kidding, then check it out for yourself. A few weeks ago, oil was hitting headlines as OPEC continued to shrivel against the amount of oil being pumped out by the US.
We were told - as always, "expensive oil would hurt us...."
Well, this just in, folks, oil is getting cheaper. And, yes, that will apparently hurt us too.
As long-term investors, we all learn we must grin and bear it at times, and this is yet again one of those times.
The speed of fear is only as dizzying as the media carnival ride you’re on.