American Consequences - March 2021


Survey, Bank of America hit the nail on the head: “The only reason to be bearish is... there is no reason to be bearish.” There is far more to that sentence than you might think. You see, that’s the exact situation you tend to encounter before markets peak. Specifically... Markets peak when there is nobody left to buy. That is all you need to know. Unfortunately, we are getting close to that point right now. And that is exactly what makes this year different than previous years. When music stars Snoop Dogg and Gene Simmons (of the band KISS) are talking up cryptocurrency Dogecoin on their Twitter accounts, you know speculating is starting to get out of control.

looking to make a quick buck on the next speculation. They are simply looking to capitalize on the Greater Fool Theory... They are hoping that by buying today, there will be a greater fool than them to pay a higher price tomorrow. But think about this for a second... Once Snoop Dogg, Gene Simmons, and all the kids in the local high school have put their money to work... where can the next greater fool possibly come from to drive prices higher? “The single most dependable feature of the late stages of the great bubbles of history has been really crazy investor behavior, especially on the part of individuals,” legendary investor Jeremy Grantham wrote earlier this year. “For the first 10 years of this bull market, which is the longest in history, we lacked such wild speculation. But now we have it. In record amounts.” That gets to the heart of it... Again, we’ve got rock stars (and Elon Musk!) pushing Dogecoin – which the founder admitted was formed as a joke and should never be worth much. That, to me, is “really crazy investor behavior, especially on the part of individuals.” The thing is, to make the most money, you want to buy when everyone is fearful, and sell when everyone is greedy (to quote billionaire investor Warren Buffett). And right now, according to the Fund Manager Survey I mentioned earlier, money managers are the least fearful they have been – ever. It’s not just money managers and celebrities

Markets peak when there is nobody left to buy. That is all you need to know.

I have personally gotten texts from rock stars... from pro surfers... and from my kids’ friends... all wanting to get in on the game. None of them were interested in the markets a year ago. Heck, none of them were interested in stocks or investing just two months ago, at the start of this year. The reality is, most of these folks are not looking to become students of the markets. Most aren’t looking to study the competitive position and profit margins of Target versus Walmart, to determine which stock could outperform the other over the next five to seven years. Instead, most of these folks are


March 2021

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