Jeff Saut 2.5.16

"As many times as we've repeated this over the years, we feel compelled to yet again remind everyone that the stock market and the economy are not the same. Financial media personalities and pundits compete to outdo one another with doomsday prognostications for higher ratings by feeding the anxiety of already frightened investors to become captive frightened listeners. Don't give in to it."

. . . Steven Gluckstein, Seaview Global Advisors

I received Steven Gluckstein's sage words yesterday from one of our financial advisors with the tag line, "Hey Jeff, Steve is a guy I have a LOT of respect for. He seems to be echoing many of the things you have mentioned." Steve's insightful missive goes:

"The stock market's abysmal start in the new year is not a harbinger of imminent economic disaster. As we stated last month, markets will be plagued by increased volatility with fragile sentiment making the market vulnerable to multiple corrections. Certainly near-term caution is warranted after the sharp drop in oil, stocks and the ongoing investor angst over the Fed's initial rate hike. Strategist calls to 'sell any rally' or even 'sell everything' have become the new mantra. These are classic signs of a bottoming along with hordes of analysts capitulating on their covered stocks as they abandon long-held views. The typical decline of between 5% and 10% for the major stock averages this year actually understates the pain for most investors since the average listed stock is already in its own bear market with a decline of 20% or more from its 52-week high. Nonetheless, we still expect that the major averages will finish the year higher - as confidence in better forward earnings guidance resurfaces later in the year along with improved political clarity."

Indeed, that sounds a lot like me! In fact, it is VERY reminiscent of another gentleman I quoted a few weeks ago named Howard Marks, of Oaktree Capital fame, who titled his report "What Does the Market Know?" One quip from said article reads:

"Especially during downdrafts, many investors impute intelligence to the market and look to it to tell them what's going on and what to do about it. This is one of the biggest mistakes you can make. As Ben Graham pointed out, the day-to-day market isn't a fundamental analyst; it's a barometer of investor sentiment. . . . You just can't take it too seriously. Market participants have limited insight into what's really happening in terms of fundamentals, and any intelligence that could be behind their buys and sells is obscured by their emotional swings. It would be wrong to interpret the recent worldwide drop as meaning the market 'knows' tough times lay ahead. . . . It's important to understand for this purpose that there really isn't such a thing as 'the market.' There's just a bunch of people who participate in a market. The market isn't more than the sum of the participants, and it doesn't 'know' any more than their collective knowledge."

Accordingly, I am sticking with my "call" that the selling stampede ended last Thursday ﴾1-28-16﴿ at session 21 in the envisioned 17-25 day "selling stampede" timeframe until proven wrong.