Saturday, October 6, 2007

When contrary opinion doesn't work

I'm starting to hear much ado about how there is too much bullish sentiment. This may or may not be true. At the end of a long bull market everybody is going to be bullish. The markets will have conditioned us to be bullish. Buying the dips will have been the motus operandi for years and human nature being what it is we will assume that strategy will now work into infinity. The thing is at the end of a huge bull market contrary opinion won't work. Everybody will be piling in. Occasionally a few will get scared and sell only to see the market rocket upward. They will then be forced to chase as they can't stand to miss out on any gains. The market will just keep rising no matter how lopsided the sentiment gets. Near as I can figure when we start to see this happen. When the public starts to catch on we've got about a year to a year and a half for it to suck in every last one of the sheep. During this time it's best to ignore all the contrary opinion polls. They're just not going to work as the markets get lost in an orgy of speculation and euphoria. Are we starting to enter this phase of the bull? I don't know but I do trust that the smart money is going to know when the end is coming and get me off the train in time. Just like they did in 2000.