Thursday, August 21, 2014

The Little Guy Isn't Getting Suckered By This Bull Market (Special Emphasis on "Bull")

By Chris Rossini

Over at BloombergView, Barry Ritholtz waxes poetic about the record stock market climb. But he calls attention to a "missing ingredient":
Rarely have conditions for market gains been so promising at a time when investor psychology has been so negative.
In other words, the little guy is sitting this one out. Ritholtz sees beams of sunshine ahead and can't understand why the little guy isn't taking the bait!
Gallup reports that only 7 percent of those surveyed were aware of last year's scorching gains in the Standard & Poor's 500 Index.
My personal experience aligns perfectly with that Gallup poll. I vividly remember the 2000 stock market bubble and how just about everyone around me was involved in the stock market - friends, family, acquaintances, it didn't matter. If you weren't day trading it was equivalent to not taking part in the ice bucket challenge!

Today is much different. I literally know only 1 person (in my close circles) who trades stocks. That's it! When it comes to everyone else, I never hear the words "stock market" cross their lips. It's non-existent.

Ritholtz has a problem with this picture:
I blame the Internet for this state of investor apathy and anxiety.
The deluge of Web warnings, along with post-crash traumatic stress syndrome, has investors obsessing over the next market meltdown. They still haven't recovered from the psychic wounds of the last one.
The endless parade of crash calls, negative omens and recession warnings plays into these fears. Never before has there been so much misleading content so freely offered by so many unqualified fear mongers.
Quick! Someone alert Hillary's Gatekeepers! Only the "qualified" may offer their opinions freely.

Myself, on the other hand? It warms my heart that the average person is ignoring the latest Fed-induced stock market boom - if only for the reason that authoritarians hate to be ignored. If they create an Alice In Wonderland stock market, by golly, you better go along for the trip!

Furthermore, even with the average person on the sidelines, the Austrian Business Cycle Theory remains intact, and is as important to understand as ever. Ritholtz and the fiat paper shufflers have not a clue. Fortunately the average person isn't listening to them this time.

Chris Rossini is author of Set Money Free: What Every American Needs To Know About The Federal Reserve. Follow @chrisrossini on Twitter.


  1. the average guy is bust....or in debt...or just getting by...

    In the Land of the Willfully Blind

    When the economy was very obviously building towards the financial crisis of 2008, how many economists were ignoring the bubble conditions, preferring to keep their noses in their statistics, a willful condition that I call data blindness. How many lawyers look at outrageous miscarriages of justice and say and do nothing? How many of those who have been blessed by circumstances sit back and smugly attribute their good fortune to their natural superiority as a the new ubermensch?

    It is not safe to see too much, and even less safe for the career minded to speak out against the actions of powerful insiders who control the benefactions of position, and the perks of the privileged class.

    It is much more judicious to hide one's nose in a selective book of statistics, ignoring the reality, and relying instead on being data blind or ideologically blind to what is really happening.

  2. The Gallup poll referenced is not a very robust gage of investor sentiment. Most of those surveyed have probably never been active investors but may well have some of their retirement funds invested. Ritholtz is talking about "investor psychology" and I'm not sure what gage he is referencing but he seems a bit out of touch. A MarketWatch article stated: "The American Association of Individual Investors on Thursday said 46.11% of retail investors described themselves as bullish in their latest weekly survey." This is the highest level this year and anything over 50% is seen by some as overly positive. I am glad CR's heart is warmed but I'm not sure the average person is on the right side of this "Fed-induced stock market boom." The retail investors are bullish and the average person is probably along for the ride via retirement funds.