Is this time any different?
By: Shishir Nigam Tue, Feb 2, 2010
Another month, another year, another attempt at a correction and another inevitable bounce. The chart below highlights the sentiments carried by many investors.
All the believers of the mantra that “Nothing ever goes up in a straight line”, have been forced to challenge their beliefs when every attempt at a correction in July, August and September gave way to higher highs and higher lows. Every time the market attempted a correction the blogosphere will be awash with claims of the baseless rally finally ending.
And so here we stand again, in the middle of the most recent bounce from a seemingly major correction when the markets fell for close to 6% in the span of two weeks from Jan 20-29. Is this time any different than every other attempt? Sure, there seem to be more solid, fundamental reasons this time for a proper correction – Obama is attempting to regulate the banking sector into submission, sovereign debt problems around the world occupy the headlines, existing and new home sales came in lower than expectations. But so what? Is this time really any different? The believers of the above-mentioned mantra, the value investors, the Buffett followers, all gain hope at every market inflexion point that maybe this time the valuations will finally come closer to fundamentals. But as they wait by the sidelines for new lows to buy in, the market bounces and just keeps on going in a straight line.
The winners in the past 9 months have very much been the people who have believe that the market has little to do with fundamentals and will continue to remain disconnected from them. The winners have been those that have used different barometers from traditional fundamentalists in assessing the markets. But will that logic continue to hold weight into the future? Most likely only till the real big correction is upon us. But wait, can that even happen? Have investors already forgotten what it feels like to be in falling market?
For their sake, I hope not, because this time it might be different.
Disclosure: Long stocks, for now.
Last 3 posts by Shishir Nigam
- When Correlations Collide - March 7th, 2010
- Is the United States an “Emerging Market”? - February 28th, 2010
- It’s Time To Accept The C$ At Parity - February 21st, 2010
Tags: Corrections, economy, markets
It's certainly been a momentum investors market. I've dipped in myself a few times over the past 4 months. My picks are mostly down, although they are more value plays and so hopefully will come good long-term.
That's what more and more people are questioning now Senan, including myself. Is the market even linked to anything anymore?
It had no memory from day-to-day…one day a certain economic data point could be interpreted as a +ve for the market and the next day the same could be a -ve. There is no continuity and traditional fundamental factors have not been able to explain market moves. The only thing that has explained market movements is the US$. USD goes down, market goes up; USD goes up, market goes down. Rinse and repeat.
What a great resource!