Beware the "Pro's" during this stock market rally
The stock market rally off the March 9, 2010 lows continues. The "Pro's" are working overtime.
The "Pro's" are the professional investors. Their ranks have increased over the last 30 years or so, since the 1974-1975 brutal bear market in stocks. Back then, the public made up more of the ranks of investors in stocks. No more. Now the "Pro's" dominate.
But wait. Pro's break down into two camps: those who invest their own money and those who invest "OPM" - other people's money.
We've always had the Pro's who invest their own money. They're simply professional speculators. They use their own dough and win or lose based on their trading skill.
The big increase in Pro's in the stock market since 1974-45, however, are those who invest "OPM." Think of money managers of mutual funds, pension funds, endowments, etc.
Why am I bringing this up now? Because this rally, which I believe to be a rally in an ongoing bear market, may be about to set up the investing public for a big disappointment (or worse). It's just the nature of the beast. My one hope: that most of the public has stayed out of this one.
The reason we're seeing this relentless pressure driving the market up is that the Pro's who invest OPM basically "have to be in." They can't afford to miss a run-up, or they'll under-perform their "benchmarks." And for a professional who invests money for institutions like pension funds and endowment funds, this could be suicide.
Example: Manager A's benchmark is the S&P 500. He's touted to "out-perform" that benchmark. The S&P heads up. What's he to do? If he stays out, he'll under-perform." Do that once too many times and - bam! - you're fired.
Think about this. It's a kind of "herd" mentality. They've all got to follow the herd or else.
Now remember that they get paid - and paid handsomely - to do this. They get paid, in essence, to follow the herd. If you got paid a lot to follow the herd, maybe you'd do it too - trade this stock market run-up, that is.
But if you're not paid to follow the herd - as in you're investing your own money - then you've got two choices:
One, develop superb trading skills and make money in the run-up, without losing it all when the downturn comes, or...
Stay out for now.
I'm mostly sitting this one out. I've got other things I can do with my money now. This stock market's pretty pricey for my blood, what with the S&P trading at a trailing P/E of almost 23.
I stayed out of the last two run-ups, I stayed out of the real estate bubble (pulled back from making a trade there too, back in 2001 - 2006) and I'm happy to sit on this sidelines now.
What about you? Want to roll the dice or hold onto what you've got.
Of course, if you're one of the Pro's, by all means hit this stock market rally and run with it.
Good luck.
The "Pro's" are the professional investors. Their ranks have increased over the last 30 years or so, since the 1974-1975 brutal bear market in stocks. Back then, the public made up more of the ranks of investors in stocks. No more. Now the "Pro's" dominate.
But wait. Pro's break down into two camps: those who invest their own money and those who invest "OPM" - other people's money.
We've always had the Pro's who invest their own money. They're simply professional speculators. They use their own dough and win or lose based on their trading skill.
The big increase in Pro's in the stock market since 1974-45, however, are those who invest "OPM." Think of money managers of mutual funds, pension funds, endowments, etc.
Why am I bringing this up now? Because this rally, which I believe to be a rally in an ongoing bear market, may be about to set up the investing public for a big disappointment (or worse). It's just the nature of the beast. My one hope: that most of the public has stayed out of this one.
The reason we're seeing this relentless pressure driving the market up is that the Pro's who invest OPM basically "have to be in." They can't afford to miss a run-up, or they'll under-perform their "benchmarks." And for a professional who invests money for institutions like pension funds and endowment funds, this could be suicide.
Example: Manager A's benchmark is the S&P 500. He's touted to "out-perform" that benchmark. The S&P heads up. What's he to do? If he stays out, he'll under-perform." Do that once too many times and - bam! - you're fired.
Think about this. It's a kind of "herd" mentality. They've all got to follow the herd or else.
Now remember that they get paid - and paid handsomely - to do this. They get paid, in essence, to follow the herd. If you got paid a lot to follow the herd, maybe you'd do it too - trade this stock market run-up, that is.
But if you're not paid to follow the herd - as in you're investing your own money - then you've got two choices:
One, develop superb trading skills and make money in the run-up, without losing it all when the downturn comes, or...
Stay out for now.
I'm mostly sitting this one out. I've got other things I can do with my money now. This stock market's pretty pricey for my blood, what with the S&P trading at a trailing P/E of almost 23.
I stayed out of the last two run-ups, I stayed out of the real estate bubble (pulled back from making a trade there too, back in 2001 - 2006) and I'm happy to sit on this sidelines now.
What about you? Want to roll the dice or hold onto what you've got.
Of course, if you're one of the Pro's, by all means hit this stock market rally and run with it.
Good luck.
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