You’d think Wall Street analysts had other things to worry about these days. But no. A hype battle is brewing among them as to whether Apple or Google will be the first with a market capitalization of $1 trillion. In early 2000, the candidate was Cisco, before the very notion was obviated by events.
With the S&P 500 down only 6% from its September high, these analysts are not worried that Apple or Google would lose their footing like Cisco did in 2000. But beneath the surface, the bloodletting has been brutal. I received this note from an investor with decades of experience:
Subject: Holy Crap
In the past 5 days, I’ve hit 15 of my trailing stops. I just placed another batch of sell orders. All I have left is mostly cash, precious metals, and bonds. I had a lot of energy MLPs in my taxable account and they have been massacred – oil, gas, coal, midstream –everything. Buy-write funds ditto [funds that use a covered-call options strategy]. I have a few stocks left, but it’s pretty skimpy.
But one thing I’ve learned to never ignore: trailing stops despite fear of a whipsaw. I have always regretted waiting.
It wasn’t this way a week ago. On October 8, when the S&P 500 was just a good day below the magic level of 2000, UBS’s Intellectual Capital Blog explained it to the worried minions this way:
We’ve all read it somewhere (or maybe thought it): The recent dramatic small-cap underperformance must be some sort of signal. At a minimum, this must mean that: 1) it is time to abandon our long-standing small-cap overweight that we initiated in August 2012 or 2) the stock market is treading on thin ice, right? Well, as tempting as it is to believe that the market “must be telling us something,” the historical record is pretty clear and leads to the exact opposite conclusion.
In fact, a vicious rout in small caps – and that’s what these folks mean byunderperformance – “is actually fairly bullish for both smalls-caps and the overall market.”
I won’t even try to get this straight.
Not a minute passes by when someone doesn’t explain to us incredulous souls that something bad, some kind of rout or wholesale destruction or a sneeze from China, is actually bullish, that in fact everything is bullish, no matter what, for a myriad reasons, including that the Fed will do another round of QE and save us all.
So on Monday, after a whiplash-inducing intraday just-buy-the-frigging-dip rally that collapsed spectacularly, the S&P 500 skidding through its 200-day moving average. That’s a crucial line for chart decipherers and trend prophesiers. The Dow and the Nasdaq have done so last week. The Dow had five triple-digit days in a row, four down, and one rip-roaring Fed-induced rally that lasted less than a day. Long live volatility. It’s back.
But it hasn’t registered yet, apparently. Axel Merk of Merk Investments dryly tweeted: “Judging from few emails brokers have received about market volatility, odds are we haven’t seen anything yet.”