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Time and Distance


Just getting back into the swing of things after a much needed vacation with family and friends. Heading into the office this morning, I was reminded of the line that Jack Palance had in the movie City Slickers in speaking to Billy Crystal. It went something like this: "you city slickers spend all year getting yourselves tied up in a big knot and then come out here for a week and expect to get it unwound." Speaks volumes.

To this end, the observation I want to pass on is this: the level of frustration out there is remarkably high, particularly for the bears but also for the bulls. What is most peculiar about this is that the price of stocks have barely budged. On June 17th the SPX ticked at 1015. Today's price is 1% higher. So in 78 days the markets have basically done nothing. Yes, the "recent" trend is up and prices have "broken out" from their trading range. But that merely masks the obvious - and more important - longer term observation.

Stocks remain largely unmoved, despite all the emotional Sturm und Drang of the past 11 weeks.

The very fact that emotions - fear for the shorts, greed for the longs - have gotten more extreme while prices have changed little is a hallmark of how psychological the markets are at their heart. That old limbic system I have written about in the past: for it, time is just as important as price in getting investors all worked up and ready to do something irrational.

That such emotional extremes are also characteristic of important distributive tops probably goes unsaid. That's what distributive tops do: suck in the last bulls but leave bears frustrated as well. No one really wins, save for those patient and rational enough to ignore the psychological impulse of fear or greed.

Many times during my vacation I thought of the old Paul Saffo maxim: Never confuse a clear view of the future for a short distance. And given how frustrated everyone seems to be, despite little real price progress over 11 weeks, I would paraphrase it thus: never confuse a change in time with a change in price.

Only a solid vacation allowed me to see that. Maybe investing success demands more time unwinding knots than tying them.
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