Horses and Riders and The Canadian Wildfires

The horses stand at the hitching post. The riders are in the saloon, having surrendered their guns at the door. They're enjoying themselves as they're waiting for...something to happen.

You might think they're all indoors because of the filthy air from the Canadian wildfires - and that may be one reason they're hanging out for this stretch. But it's not the only reason. The wildfires are just a distraction. They take everyone's mind off what's happening around them.

What's happening?

Well, we could dredge up the whole elites vs. the rest of us thing. And that's certainly always percolating. We could follow that up with a slew of items that present a clear and present danger to our country, our society, our culture, etc. But let's stick with the markets and the economy for now. If we do, our Wild West World does a good job of setting a proper view.

So if you're rider, rather than a horse, be sure not to imbibe too much. You hear the piano plunking out well-known tunes. Some of the patrons are singing. The barmaids keep coming around asking if you'd like a another. Stick with the singing. Nurse your drink.

Oh, sure, it's festive, and you're feeling good, maybe even happy. But it may not last much longer. No, it's likely not going to last much longer.

That's why you keep the drink count low - down to the level where your brain can keep whirring. (Not just thinking clearly, but actually whirring - the sort of thinking we need when things go south on us and we've got to make snap decisions.)

What's all this about?

Well, it's simply an attempt to shake us out of the somnambulism that has descended on the financial world in recent weeks - even months. It's blanketed everything, kind of like that Canadian wild fire smoke. If you live in a part of the country that's been blanketed - as we've been - you might understand the thoroughness and impact of such an unhealthy envelope.

Another unhealthy envelope now surrounds financial markets and the economy. It obscures any possibility of seeing the sky clearly. We're living as we always have, but reality remains at a distance. Fantasy has replaced it.

Too dramatic? Maybe. But try making sense out of what's going on right now in light of what proceeded it. And not just the bear market drop in stocks - particularly the NASDAQ until later in 2022. Go back at least to 2008 for a true perspective. Research the Fed's pumping out of historic liquidity, along with negative interest rates. Witness the growth of federal debt into the stratosphere and beyond. Then come back with the current positive, bullish picture being painted now.

Not sure about this bullish picture? Well, the AAII (American Association of Individual Investos) survey of investor sentiment just reversed in what may historic proportions. Its long bearish reading fell from 37% to 24%; conversely bullish sentiment rocketed from 29% to 45%. Has there ever been a more dramatic shift in the history of this survey?

So as we're sipping our adult beverage - with an emphasis on sipping - with clear minds whirring, it sure does look like the traditional relationship between individual investor sentiment and subsequent stock market action is set to assert itself square in the path of the galloping bulls.

OK, that may be likely. But is it going to long-lasting, indeed a return to the bear market that socked stocks starting in 2021, through most of 2022? That's still up for grabs. But if it's a more short to intermediate downturn, don't take that as signal to start guzzling.

Best to keep our minds clear at least through the rest of this year. 

Just sayin'.