I Was Wrong. The Optimist Was The Contrarian

“”How come the stock market is going up, when the economy keeps tanking?” Telegraph asks today.

Is the upswing in stock markets a sign of a much wider return in confidence that will eventually find expression in the real economy, or is it a largely artificial phenomenon that will last only as long as the QE? 

Telegraph News

I am not alone in my disconnect. The move in the recent weeks has created a diaspora of thought.

The market moves are powered by just poor news, irrelevant headlines and expectations of inflation in all asset classes led by a worldwide currency debasement game.

The macro economy has no ammunition left for improving sentiment. We are all reduced to praying for a better day tomorrow, as we realise that the current macro policies are like pushing on a string because there is no true price discovery in the market anymore. We have all been reduced to a bunch of central bank watchers, only ever looking for the next liquidity fix, like some kind of horde of heroin addicts. We have a proforma capitalism with de facto market totalitarianism. Can we have our free markets back please?

All the doomsayers have been proven horrendously false so far.

And what is the price for that ? Missing out on a 11% rise this year so far as the Dow Jones Industrial Average breaks its historic high last Friday to attain a 14,397.07 close.

What else have you missed out on ?

YTD Change In Indices Commodities and Forex

Most investors are beating themselves up over this and scratching their heads as to how they could have missed this golden opportunity. The rest who are on the right side of the fence are falling over themselves to load up more.

The burning question I get most these days is “Is it too late to buy now ?”

Most reports are now singing to a different tune. Glossing over their past cry wolves on the fiscal cliff, the sequester, the Italian elections and all the nah-nah negative news. Even Dr Doom Roubini has changed his rhetoric to suggest that the correction will only happen in 2H13.

Traders, Analysts

Mood on NYSE Floor: What Goes Up Has to Go Down

Wall Street’s Brightest Minds Reveal The Charts That Worry Them Most

Stock markets defy economic woes


Goldman’s O’Neill says stocks around the world are still cheap

Let’s face it.

Our cheap home made analyses are not working. But, on a bright note, neither are all the leading thinkers. Pimco’s Bill Gross, one of them.

Bill Gross: Asset prices appreciate in price these days primarily because the Fed & its banks create credit. When that stops, they don’t go up.
Bill Gross: “How do we know when irrational exuberance has unduly escalated asset values?”…when the Fed buys trillions of them.
BILL GROSS: G-20 not one big happy family. Developed vs. developing. Currency wars, trade restrictions, money printing, are the weapons.



Instead, we have the financial tabloids taking over AGAIN. Reminding us of what we have missed out on and to jump in before its too late.

Well, it does seem that being a skeptic contrarian WAS NOT contrarian at all and the trend. And the optimist was the contrarian.

Too many skeptics spoil the broth.

This rally was brought about by the skeptics giving up because their time has run out.

Hold on here.

Just look at the table above.

It seems that all that are taking flight are the equity markets and of course, USDJPY.

All the necessary ingredients to a sustained recovery such as commodities are not pointing to increase demand for consumption. Not unless the world is going to eat more clothes from cotton and giving up wheat and meat.

Traders have Murphy’s Law in built in each one of them. When the last contrarian dies, the turn will come.

I do not have the emotional tenacity to be the last contrarian. Then again, I do not have the dim wit to be greatest fool as well.