"After four weeks of declines in equity prices, it’s natural to wonder which way stocks are headed. There is great uncertainty surrounding the Eurozone’s ability to contain, let alone solve, its “Black Debt” crisis, and economic indicators from the U.S. have been very disappointing. This week’s Philly Fed report was dismal. Eric Green, economist at TD Securities, described it as “exceptionally weak, almost macabre.” (Philly Fed report evokes dark images from economist) When major analysts describe the markets using terms commonly found in the nightmarish parts of H.P. Lovecraft stories, investors become skittish.
Some respond with anger. “They’re mad as hell, and they aren’t going to buy the dips anymore” is how the Wall Street Journal described small investors. They are an unhappy lot who are “too frightened and too angry to buy, they are simply watching with a sense of helpless horror.” An online survey conducted by a team of psychologists asked Americans questions designed to determine the impact of the recent financial turmoil on their mindset. The results were discouraging. When asked how angry they felt about “the financial challenges facing our country now,” 59% said they were either “moderately” or “very” angry, and 52% said they were either “moderately” or “very” fearful. “The mood of investors is at least as bad as in the darkest days of early 2009, when the financial world itself seemed about to end.” (Too Flustered to Trade: A Portrait of the Angry Investor)
Others respond in a more active manner - they panic and sell out of the equity markets, blindly running for the exits as they allow fear to take over their decision-making process. “Janet Moffett says that her stomach dropped on Thursday as her anxieties about the economy worsened. The 73-year-old Beverly, Mass., resident, who retired in April, planned to call her financial adviser after she ‘settles down’ to ask that he move more of her $200,000 investment portfolio into cash. Otherwise, she says, ‘I think I am going to be wiped out.’” (Last Straw or Time to Buy?)
Some professional money managers may be turning more bullish after the recent sharp declines. Hedge fund manager Barton Biggs appeared on Bloomberg Television this week, saying, “We may be in the process of making an important bottom...if analysts and investors really believed the S&P earnings estimates, the market wouldn’t be selling where it is.” (Biggs Says S&P May Be Bottoming, Priced for 15% Profit Drop) However, Mr. Biggs tends to be bullish even when bullishness is unwarranted. For example, he was bullish in late May this year. As Phil observed, “If you are always telling people to buy-buy-buy, can anyone really follow your advice?” (Biggs Says Stock Bears Wrong Even as Economy Slows: Tom Keene)
Lee Adler of the Wall Street Examiner is less optimistic. He explained, “As Treasury prices rise, the shorts are squeezed and margin calls go out, forcing liquidation of equities and some commodities, forcing even more margin calls. Dealers, who no longer have the support of the Fed in absorbing Treasury supply, must commit an increased portion of their resources to absorbing massive waves of new Treasury supply before distributing it to the market. Until the end of July, they had been short Treasuries on balance, and had to absorb big losses as a result.”
at http://www.zerohedge.com/contributed/qe3-or-not-qe3
Some respond with anger. “They’re mad as hell, and they aren’t going to buy the dips anymore” is how the Wall Street Journal described small investors. They are an unhappy lot who are “too frightened and too angry to buy, they are simply watching with a sense of helpless horror.” An online survey conducted by a team of psychologists asked Americans questions designed to determine the impact of the recent financial turmoil on their mindset. The results were discouraging. When asked how angry they felt about “the financial challenges facing our country now,” 59% said they were either “moderately” or “very” angry, and 52% said they were either “moderately” or “very” fearful. “The mood of investors is at least as bad as in the darkest days of early 2009, when the financial world itself seemed about to end.” (Too Flustered to Trade: A Portrait of the Angry Investor)
Others respond in a more active manner - they panic and sell out of the equity markets, blindly running for the exits as they allow fear to take over their decision-making process. “Janet Moffett says that her stomach dropped on Thursday as her anxieties about the economy worsened. The 73-year-old Beverly, Mass., resident, who retired in April, planned to call her financial adviser after she ‘settles down’ to ask that he move more of her $200,000 investment portfolio into cash. Otherwise, she says, ‘I think I am going to be wiped out.’” (Last Straw or Time to Buy?)
Some professional money managers may be turning more bullish after the recent sharp declines. Hedge fund manager Barton Biggs appeared on Bloomberg Television this week, saying, “We may be in the process of making an important bottom...if analysts and investors really believed the S&P earnings estimates, the market wouldn’t be selling where it is.” (Biggs Says S&P May Be Bottoming, Priced for 15% Profit Drop) However, Mr. Biggs tends to be bullish even when bullishness is unwarranted. For example, he was bullish in late May this year. As Phil observed, “If you are always telling people to buy-buy-buy, can anyone really follow your advice?” (Biggs Says Stock Bears Wrong Even as Economy Slows: Tom Keene)
Lee Adler of the Wall Street Examiner is less optimistic. He explained, “As Treasury prices rise, the shorts are squeezed and margin calls go out, forcing liquidation of equities and some commodities, forcing even more margin calls. Dealers, who no longer have the support of the Fed in absorbing Treasury supply, must commit an increased portion of their resources to absorbing massive waves of new Treasury supply before distributing it to the market. Until the end of July, they had been short Treasuries on balance, and had to absorb big losses as a result.”
at http://www.zerohedge.com/contributed/qe3-or-not-qe3
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