Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Climbing The Wall of Worry


Couldn't (and shouldn't) this be telling us more about the market's health than all this talk about how worried the markets are?


This adage of stocks "climbing the wall of worry" is the phrase financial writers pull out when stock prices are rising regardless of market uncertainties. Let's examine a few of those uncertainties, shall we?

First, we've got the midterm elections in 20 days. The media, which gave the Democrats the election months ago, is now fretting that it's too close to call. Just today I was reading in the Washington Post that they can't understand why President Bush and Karl Rove aren't worried. Seems the media is projecting its fears of letting the midterms slip through the Dem's fingers to the White House, and why Bush and Rove should be quaking in their boots.

Next we've got the economy. I just flew out here to California for the San Francisco Money Show and there was not an empty seat on that United 777. Restaurants, both out here in the City by the Bay and back home in Chicago, are packed. Same thing goes for shopping centers and malls.

I asked clerks in Macy's, Nordstrom and at a Gucci store at nearby Union Square how business is, and they all said it's very strong. And when they're selling Guccissima leather upper boots for $925 and can't keep 'em in stock, things can't be that bad!

(For the record, I had no idea what Guccissima leather was, but when a beautiful Italian woman described it to me, it was nearly a religious experience -- or something!)

Here's another economic indicator from out here on the left coast. I know someone who owns several high-end auto dealerships in the Bay area. When we were talking on Saturday, he told me he's sold his allocation of Range Rovers going out three months into the future. He said the Porsches aren't commanding premiums over their sticker price, but he's still selling new inventory as quickly as he gets it.

Just like they want to do to the Republicans, everyone wants to write off California due to the much-hyped real estate bubble, but that too seems hasty. By the way, my friend also has Subaru, Acura and Honda dealerships, and those are doing a very brisk biz too.

When the market climbs the wall of worry, the fuel for the rallies is the doubt that keeps money on the sidelines and shorts sticking with their bets. Investors want to wait for an all-clear to sound, or a bell to be rung, but traders know they don't ring bells at the bottom or at the top -- and you can hear the silent screams of the shorts as the markets continue their upward thrust.

Lastly, the Chicago Board Options Exchange's Volatility Index (VIX) tracks trader and investor sentiment on a moment-by-moment basis. When do you suppose, ladies and gentlemen, that the markets were most nervous?

The above graph shows that the markets were most nervous as the second quarter came to an end -- not as we begin this, the fourth quarter. In fact, the market's sentiment seems very comfortable, and not at all nervous.

Couldn't (and shouldn't) this be telling us more about the market's health than all this talk about how worried the markets are?
< Previous
  • 1
Next >
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos