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Minyan Mailbag: Wall of Worry? Or Grist for the Weary?



Hi John,

I was reading Dennis Leontyev's commentary on Minyanville. I was struck with disbelief with the following quote:

"The obvious bearish divergences should be ignored at this point, and although I don't think we will experience more hurricanes to provide market support, a couple of terrorist attacks like in London or Bali should be enough to push S&P to a new recovery high above 1250."

I just cannot believe what state we have come to. It is like believing that unfairness, dishonesty, cunningness will make a person of highest character.

So even though it may very well be possible that another terrorist attack would be viewed by the market as a reason to jam higher, I would rather not participate in any such moves.

Also if this is how the majority of money managers view business, then we are heading towards an inevitable crash. (The same article says that bears are not pressing bets, so when you want to sell the cushion below the market would get thinner and thinner, as more and more bears are throwing in the towel).


Minyan Suhas

MS -

It truly is amazing to watch the responses the market gives to various "bad" news. Bulls use this as fodder for higher prices (the wall of worry story) and bears have become weary.

It is a phenomenon borne of government fiat control and high involvement in "markets." It is a self-reinforcing build-up of excess that doesn't end easily. Your decision to not participate is one of risk control: an unwillingness to play along because the risks have become too great. This is a first step where the few making that decision now turns into more as the risks grow and finally turn into a mass exodus when even the most clueless are forced into resignation. Markets will bend, but they will not break to economic foolishness.

Those controlling risk will be survivors to the cruel hoax being played by policymakers.

As for the quote you refer to, I do not know Dennis, but believe that he is long term bearish and part of what was said is sarcastic: it strains credibility that bad events are met with higher asset prices. His stance seems to be that right now bullish forces (fiat money) are in control and the "market" bears are not yet ready to assert themselves. This is reasonable.

Market participants come in all kinds and what we are talking about here is that the market has now, through its participants, decided to accept almost any risk for almost any return. But I believe Minyanville is not about correctly determining the turning point at which the markets decide to re-establish a proper risk premium, it is to educate and discuss facts as to its current environment. Cavalier statements of acquiescence do much harm to this mission.

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