Yesterday I participated in the AdvisorShares Alpha Call which is their weekly interview with a portfolio manager or two. A big talking point yesterday was on certain behavioral aspects of investing and market action that repeats over and over.
In macro terms this includes things like getting greedy after a large rally or frightened after a large decline. In the micro the recent developments with Apple (AAPL) are a great example. The comments mostly at Seeking Alpha have captured some of this over the years which has helped me in terms of trying navigate cycles and draw conclusions.
One line of thought I have expressed before is that the more pushback in the comments of a post the more likely the point being made carries some water. I thought 2009 would be a good year in the market and commenters tore into me pretty good. Same thing when I wrote about lightening up on AAPL a few months ago.
With the market close to new highs the bullishness on CNBC (this is a sentiment gage no matter what you think of the people on there) seems to be very high. So optimism after a large rally. The next time there is a big decline in the market it will scare the hell out of a lot of people and will cause them miss much of the ensuing bounce back. We've been hearing for at least a couple of years how retail investors have missed the rally.
There will be other stocks like AAPL that come along with something "different" which will propel it to have the largest market cap in the world for some period of time. There will be cultish devotion, it will be over owned and then the good times will unwind. I don't know why exactly but for whatever reason, Exxon Mobil (XOM) seems to be the only company that can remain the biggest.
I wrote about these things before the financial crisis because they happened before the crisis. Then they happened during the crisis and they will happen again in the future. The details are always different but the market action isn't.
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3 comments:
Of course those with flawless execution skills and unlimited self esteem will try to carve you a new body hole.
It seems to me that you have done a commendable job keeping reader's heads on straight during the many moods of Mr.Market with grace and dignity.
I don't think sensible observers expect flawless stock picks or impeccible market calls from you. We'll leave those to Jim Cramer, Robert Prechter and Abbey Cohen.....hahahahahahahaha.
T
Thank you T. My context was sentiment as expressed through comments as being a contrarian indicator.
Exxon is consistently at the top of the market cap universe because they are probably the best allocator of capital in the world next to uncle warren. What I find amazing is that the price of oil had a terrific 18 year collapse from 1982-2000, and yet Exxon showed tremendous eps and dividend growth in the face of this decline. Hard to argue with the job that their management has done for many years.
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