Market On Open, Friday 19 September
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Fear Sells
by Alex King, CEO, Cestrian Capital Research, Inc
There always has to be a folk devil. A shadowy figure or institution that we can point to and say, that’s the bad guy that is or might be about to take our money. Now, sometimes the bad guy is the bad guy and he does take our money. But most often the bad guy is a phantom, a folk devil whipped up as part of a narrative whereby other people take our money whilst blaming the bad guy. This in fact is the entirety of how stock market psychology works. Why do people sell their stocks? Because of the folk devil du jour. Last week it was FOMC. Today it’s the Bank of Japan, which is busy selling off its primarily Nikkei-based ETF holdings. This may hit the Nikkei (it’s down a couple points right now) and it may even hit the US indices if there is spillover selling. But at the time of writing, S&P500 futures are down 0.02% after a big runup of late where in truth we could expect a little selloff just to let off steam. So right now, when you see the fear stories roll around the Internet about BANK OF JAPAN DUMPING EQUITIES, you can say, well, yes this might mean I should sell my stocks, but right now, Big Money is not selling its stocks because if it was, S&P500 futures would be down hard. This is what I mean with my constant refrain of, Follow Big Money, never get In Front Of Big Money. And please, never, ever, fall for a narrative. Learn to spot a narrative and ride its wave, sure, but don’t get on the wrong side of it. (We’ll talk next week about how to spot a narrative and benefit from it).
Credit on Japan matters goes to our Tokyo desk, headed by Yimin Xu. You can read all about his tremendous work, here.
Alex King
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