In trading circles you often hear of the term "dumb money" and "smart money". "Dumb money" often refers to retail investors who blindly follow their favorite blog or the likes of a Jim Cramer. It's these people's job to come up with a story everyday and show people how they can capitalize on it. The problem is this: there is no accountability. There are no repercussions for being wrong. No one ever turns to Jim Cramer the day after and says "Boy Jim that sure was a horrible call on IBM there yesterday!" It's a show. The "smart money" is not necessarily smarter that the "dumb money". The "smart money" is simply open to the fact that the market may not go up forever and that a crisis like Lehman can indeed happen again. So it should come as no surprise that this is what the "smart money" has been doing since Lehman:
The "smart money" has not participated in this ramp up since 2008.
What is more alarming is that according to Bloomberg:
The number of traders with more than 10 million yuan ($1.6 million) of shares in their accounts shrank by 28 percent in July, even as those with less than 100,000 yuan rose by 8 percent, according to the nation's clearing agency. While some of the drop is explained by falling market values, CLSA Ltd. says China's rich have taken advantage of state buying to cash out after the nation's record-long bull market peaked in June.
The issue for me is this: the "smart money" not participating in the US equity market is not that big of a deal. A lot of these equity holdings are old money created far before the Lehman crisis and the US economy is among (if not the) strongest economies in the world. The Chinese story has a very distinct possibility of truly being the paper tiger we all feared with little fundamental basis for being at the level it is. Greece doesn't seem like that big of deal in comparison does it?
Trade well and follow the trend, not the perma-bull OR perma-bear "experts."
Behold the age of infinite moral hazard! On April 2nd, 2009 CONgress forced FASB to suspend rule 157 in favor of deceitful accounting for the TBTF banking mafia.
The markets had a very choppy session yesterday, as we bounced back and forth throughout the day. The major averages finished negative, while the COMP and DJI almost finished with similar losses for the session. This is all ahead of the FOMC minutes release today that is due out at 1 pm CDT. While a calendar...
The beauty of option volatility trading is its flexibility. The math does not change as you move from one asset class to another. The market forces certainly change, but if you have a market that you want to trade, your option education goes right along with you, seamlessly. Let's say you are the type of trader whose...
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Keep a civil tongue.