GREED CONSENSUS: (Positive Consensus/Bear Market Indicator) Get-rich-quick schemes flourishing

July 23, 2015

Beware the money hucksters, especially in a bull market

Beware the money hucksters, especially in a bull market

When stock prices are rising or in any sustained bull market, everyone is Warren Buffet or thinks in their mind they are. Bull markets also bring out the hucksters that tap into people's emotions or fears that they are missing out on the bull market by touting can't miss investment strategies. This phenomona is in full effect these days at so called "Money Shows" where said investment gurus congregate to spread their gospel or snake oil. In a bull market these gurus will pound the table on aggressive investment strategies and throw ideas about caution and risk through the wind. In a bear market the themes are much more conservative.

Case in point a recent money show in San Francisco, ground zero for one of the big drivers in stock prices the past several years with Silicon Valley next door. According to the author who attended the show, "I count on the fingers of one hand the presentations dedicated to managing risk and how to avoid losses. In contrast, there were numerous workshops catering to greed, with advisers enticing investors with the prospect of triple- and even quadruple-digit returns."

The author further adds,

If the pendulum that swings between greed and fear is closer to the former, then newsletter ads will brag about the editors’ successes in helping you get rich quickly. When the pendulum swings to fear, in contrast, capital-preservation strategies will be what sells investment products. Newsletter advertisers then will boast about how their clients can reduce risk and help us sleep better at night.

Right now it's about tapping into investors psyche to convince them that they are missing out on untold riches and that they need to jump in fast before the train leaves the station.  Of course the retail investor will be easily had and go all in at probably the worst time and set themselves up for a world of hurt. If the narrative right now is easy money can easily be had, then it should be met with a great deal of skepticism. Interest rates are heading up, the very stimulus that has kept stock prices high. Other sources of yield will begin to emerge which will throw a wrench into many of the strategies that are being promoted at these money shows.