Fear & Loathing (and Greed) on Wall St

Takeaway: With the Official Meddlers in high gear, market volatility is on a tear.

(Editor's note: The sneak-peak excerpt which follows below is from Hedgeye's popular "Investing Ideas" newsletter that is sent out every Saturday morning. Investing Ideas is for the savvy, longer-term self directed investor looking for fresh, long-only opportunities.This week we focus on seven of our high-conviction stock ideas.  It also features macro commentary like the excerpt below. With your subscription, you'll know immediately when one of our award-winning analysts uncovers a new Idea or changes a current one. Click here to sign up.)

Fear & Loathing (and Greed) on Wall St - fearloathing

Fear & Loathing (and Greed) on Wall Street

With the Official Meddlers in high gear, market volatility is on a tear.  Pundits expect a protracted period of turbulence – possibly running through year end, or even into Q1 of 2014 – as the Fed pretends to decide what policy steps it will take, aided and abetted by their partners in crime at the European Central Bank and the Japanese policy to out-print the US Treasury.  The “Fear & Greed” index maintained by CNN Money was registering Extreme Greed just one month ago.  It now reads Extreme Fear.  It’s “Risk-On” worldwide.

 

Hedgeye CEO Keith McCullough, who reminds us that Risk is always “On,” says our sentiment analysis since the end of 2012 “has indicated you want to be long fear – everyone is looking for a crisis that didn’t come."

 

Did it finally come this week?


Hedgeye remains firmly bullish on US economic growth.  This is not the same as being bullish on the stock market, which is easy to overlook with the indexes at all-time highs.  The Fear Factor is so overpowering in the short term that people always lose sight of the longer term.  As we have observed, highs are made in the markets when Greed overpowers Fear, as note the recent all-time highs in the stock market indexes, that coincided with the CNN index’ “Extreme Greed” reading.  And conversely – no surprise here – when Fear is in the ascendant, markets make lows. 

 

This week’s gapping-down openings in the S&P 500 have been seen as nothing short as a sign that Life-As-We-Know-It is coming to an end.

 


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