Making Money Alert: The Great Wall Street Fear Kill

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

The fear is gone on Wall Street.

Advertisement.

Apparently, there is nothing to worry about; stocks will no longer go down, and the lion will now sleep with the lamb.

I jest, of course, but if you read the financial press these days, or if you listen to the plethora of pumped-up pundits extolling the virtue of equities, you might come away with the idea that all is bliss in stock land. A case in point is a recent Wall Street Journal article titled, “Investors Finally Shed Fears.”

In the piece, we find out, “Individual investors are doing more stock trading. Mutual-fund companies are seeing money being put to work in both stocks and bonds. Advisers say they are hearing from investors who had been hunkered down for years but now are feeling more comfortable that another big meltdown isn’t lurking around the corner.”

Advertisement.

The article does go on to point out that greed hasn’t completely replaced fear as Wall Street’s governing emotion, but quickly thereafter it goes into a litany of metrics confirming the great Wall Street fear kill.

Some of those metrics include the seven-week winning streak for the S&P 500 index, which is up 6.6% so far in this young 2013. Then there’s the Dow, which is up 6.7% year to date, and now trades above 14,000 and near its highest level ever.

Then there is the lack of fear, as measured by the “fear index” itself, the CBOE Volatility Index, which is better known as the VIX. The measure of volatility on S&P 500 options has languished below the 15 mark for all of 2013, and the following chart of the VIX shows the volatility index at its lowest point in years. The latest stint below 15 is the longest such stretch under this technically and psychologically significant level since early 2007.

Indeed, judging by these metrics, fear has been swatted down and tossed in the trash by investors, and that means more buying to come — until, of course, it doesn’t.

Advertisement.

In recent weeks, I’ve said that the beginning of 2013 reminds me of 2008; when everyone was über bullish on stocks, and nobody thought the major averages would ever drop significantly. Well, we know that notion was faulty, and we know that anyone saying stocks can’t go down again is living a pipedream, too.

Exclusive  George Gilder Discusses Blockchain, the Graphene Age and More in Interview on NYSE Floor

I think now, more than ever, investors need to cultivate a strong fear instinct, because it is precisely when there is no fear in the markets that things tend to drop very, very fast. Will there be more buying in 2013? Quite possibly, but we also could witness a serious sell-off if we see a continuation of the downbeat economic data lurking behind the bullish curtain.

Poor revenues from retail giant WalMart (WMT), higher gasoline prices, sluggish growth in Europe, and weak U.S. gross domestic product (GDP) and employment growth are just some of the reasons that could put fear back on Wall Street’s front burner and heat things up significantly for all of those fearless bulls rushing back into stocks.

To find out when it’s time to get back into equities once the current greed and fear cycle tempers, check out my Successful Investing investment newsletter today.

On Strength and Repair

Advertisement.

“The world breaks everyone, and afterward, some are strong at the broken places.”

–Ernest Hemingway

If you’re human, you’re going to experience sorrow, sadness and heartbreak. But it’s how you emerge from these that determine your existence. Often, coming out stronger in the broken places is the difference between being happy, and living a life of pain.

To read my e-letter from last week, please click here. I also invite you to comment about my column in the space provided below.

Wisdom about money, investing and life can be found anywhere. If you have a good quote you’d like me to share with your fellow Making Money Alert readers, send it to me, along with any comments, questions and suggestions you have about my audio podcast, newsletters, seminars or anything else. Click here to ask Doug.

Advertisement.
share on:
share on:

PREMIUM SERVICES FOR INVESTORS

Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen is a professional economist, investment expert, university professor, and author of more than 25 books.

Product Details

  • Forecasts & Strategies
  • Home Run Trader
  • Fast Money Alert
  • Five Star Trader
  • TNT Trader
LEARN MORE HERE

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays.

Product Details

  • Cash Machine
  • Premium Income PRO (exclusively for subscribers of Cash Machine)
  • Quick Income Trader
  • Breakout Options Alert
  • Hi-Tech Trader
LEARN MORE HERE

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker,
financial journalist, and money manager. As well as a book author and regular contributor to
numerous investment websites, Jim is the editor of:

Product Details

  • Successful Investing
  • High Velocity Options
  • Intelligence Report
  • Bullseye Stock Trader
  • Eagle Eye Opener
LEARN MORE HERE

Bob Carlson

Bob Carlson provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

  • Retirement Watch
  • Retirement Watch Spotlight Series
  • Lifetime Retirement Protection Program
LEARN MORE HERE

Jon Johnson

Jon Johnson's philosophy in investing and trading is to take what the market gives you regardless if that is to the upside or downside. For the past 21 years, Jon has helped thousands of clients gain success in the financial markets through his newsletters and education services:

Product Details

  • Investment House Daily
  • Stock of the Week
  • Technical Traders Alert
  • Rapid Profits Stock Trader
LEARN MORE HERE

DividendInvestor.com

Used by financial advisors and individual investors all over the world, DividendInvestor.com is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

  • Dividend Investor
LEARN MORE HERE

George Gilder

George Gilder is the most knowledgeable man in America when it comes to the future of technology and its impact on our lives.  He’s an established investor, bestselling author, and economist with an uncanny ability to foresee how new breakthroughs will play out, years in advance.

Product Details

  • Technology Report
  • Technology Report PRO
  • Moonshots
  • Private Reserve
  • Millionaire Circle
LEARN MORE HERE

DayTradeSPY

DayTradeSPY was founded by head trader Hugh Grossman, a retired internal auditor for a Fortune 500 company. After years of first-hand experience trying out one trading strategy after another, Hugh instead developed his own trading system centered around day trading SPY options. That’s it... Nothing else.

Product Details

  • Trading Room
  • Pick of the Day
  • Inner Circle
  • Online Workshops
LEARN MORE HERE