Wouldn't you know it. After the close last Friday, I tuned into CNBC and in less time than it takes to scream "It's a breakout!", Ron Insana uttered those impossible words:
S-A-N-T-A
C-L-A-U-S
R-A-L-L-Y
Yes, that's right! When the market was really moving back in late spring, I remember discussing the sentiment cycle with the Active Trader group as the market was climbing the wall of worry, not sure if the early numbers pointing to an "economic recovery" was real or not. There was total disbelief in the market's ability to move up and sustain higher prices. At the time, I said that there would be no way any one would even dare hold out hope for a "summer rally", let alone extended upward price action. Back then, as Justin Mamis would say, the price risk was lower than the information risk. Stocks are mostly cheap when the outlook is bad and/or uncertain.
And now we have it. It's official. At the end of a year-long rally, with prices near two-year highs, the financial commentators are reporting with confidence that Santa is sure to have a sack full of cash instead of lumps of coal. Yesterday, Maria was reporting excellent fundamental economic news, "surging" numbers in fact, with a smile.
We have come full circle. Confidence has returned. Things are looking really good, but the price to be paid for all this good news is high too, in the form of high prices. At this point, we can be sure that price risk is much higher than information risk.
It's that old conundrum. Do we want to pay wholesale, or retail?03.12.02 10:32 #