I got a text today from a trader friend who is short the market saying: “This market is NEVER going down!” About 10 minutes later, I got a text from a different friend who is long the market saying: “I HATE this market!” It got me thinking about a few things. Many traders and professional money managers have recently voiced their opinions about the current market and when you read between the lines, you can hear one common theme: Frustration!
For example, in David Einhorn’s quarterly letter to clients, he wrote “There is a clear consensus that we are witnessing our second tech bubble in 15 years.” Now I have TREMENDOUS respect for Mr. Einhorn, but I completely disagree. If we were in a bubble, everyone would be cleaning up in the stock market. We would see Ferrari’s racing down Park Avenue, and your neighbor, grandmother, dentist, etc. would be talking about how much money they’re making. I associate bubbles with euphoria. You can’t call it a bubble when the majority of people HATE the stock market. My honest opinion is that he was frustrated with his negative performance for the quarter and his comments were more of an excuse. Again, I am not picking on Mr. Einhorn, I am simply telling you how I interpreted it.
Today at the Sohn Conference, Paul Tudor Jones said “Macro trading has probably been as difficult as I have ever seen it in my career.” He’s been in the business for almost 40 years. For the record, Jones is my personal hero not only for his amazingly consistent success as a money manager, but also for his incredible philanthropy. My point being that if one of the best in the business is expressing his frustration, then you KNOW this current market is challenging. You can also see it in the results of many hedge funds who are down year-to-date and their managers are voicing similar opinions.
Personally, my biggest frustration is the disconnect between stocks and the general averages. Many growth names have got crushed over the last 2 months, but the Dow and S&P 500 are sitting near new highs. Actually, it’s not a big frustration because I am doing well so far this year. It’s more annoying to hear comments about how the markets are strong when I see a lot of carnage beneath the surface. Again, it’s not a big deal and it will resolve itself one way or the other.
If you are doing well in this market, then I applaud you! It probably means that you are being flexible in your approach and making strong decisions. If you are struggling and frustrated (like it seems many traders are), then I suggest keeping things light until conditions improve. In other words, protect your capital and your confidence and wait for a market that is more conducive to your style. Remember, the market isn’t going anywhere. It will be open for a long time…but just because it’s open, it doesn’t mean you have to trade it.
I can be reached at: jfahmy@zorcapital.com.
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