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After Midnight



October 05, 2011 – Comments (4) | RELATED TICKERS: SPY

"The darkest hour is just before the dawn."  Proverb

For the past twelve years, I have been outright negative about the economy and equity markets.  Recently though, at long last, I have started to feel optimistic.

Last month I hinted at my developing optimism.  A month later I am not all the way there yet mind you, but I can see the blue sky starting to form on the horizon.  

Today, I want to cover four specific reasons that I am feeling better, and one incredible opportunity that is just developing. 

But first, a public service announcement.

Pessimism Is a Contrary Indicator

Much as extreme optimism is an indicator that things really are not as good as they seem, extreme pessimism is an indicator that things really are better than they seem.

Today, pessimism is an overarching theme throughout not only the stock and bond markets, but also society in general.  While I would not argue that there are no legitimate reasons to feel pessimistic given the recent financial and social history of the world, it seems to me that the dark emotion is overstating reality at this point.  

Where were the pessimists from 2002-2006 when we were creating our current financial mess?  Well, back then, most people were smiling optimists enjoying their good fortune.  Today, many of those same people are angry and anxious over today's seeming poor circumstance.  It is too much, too late.  It is time to look to the future.

To read further click here.

4 Comments – Post Your Own

#1) On October 05, 2011 at 8:47 PM, Option1307 (30.45) wrote:

Nice thoughts, thanks for sharing. +1.

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#2) On October 05, 2011 at 9:50 PM, HarryCaraysGhost (56.57) wrote:

Thanx Kirk.

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#3) On October 06, 2011 at 2:08 AM, walt373 (99.90) wrote:

There's a crude but easy way to gauge sentiment in today's situation. First, you ask what would be a reasonable level for the market, or what would be a reasonable percentage drop, if in fact a worst case scenario did materialize? I would say, Europe melting down while China crashes should call for a 40% drop at the very least, that's not really asking too much. And we've only fallen 16% since the peak back in April. So we're not really pricing in a worse-case scenario yet.

Also, I look at the put-call ratio sometimes, I find it useful an objective view of sentiment. Short-term market bottoms during a panic almost always have a spike in the put-call ratio (although the converse of that statement is not really true).

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#4) On October 06, 2011 at 9:14 AM, kirkydu (89.83) wrote:


I pretty much agree with you.  As I mentioned, I'm not all the way optimistic right now, but I can see it coming.  I am sitting on about 1/3 cash which I plan to use to sell puts and buy calls when price levels hit certain thresholds, which are lower from here.  

Given the high number of reported layoffs in September, I'd expect the next set of unemployment numbers (not today's) to be a significant downer.

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