Investors Primal Fear is their inability to deal with Market crashes

Investors Primal Fear

The masses have short term memories, so they probably think this October is the first time the Dow is experiencing this wild volatility. Then again, they learn nothing, and instead of buying, they end up selling close to the bottom. Cash is being built up across the board, and our new index Gnosis Panoptes Index (GP Index) registered some unusual activity. The GP Index is new, and we are forward to testing it now. But when this data is combined with the “rage and discontent index” which experienced a massive surge over the past few months, sky-high V readings and the crowd’s belief that October is a bad month (since the famous crash of 1987), then the current action should come as no surprise. Furthermore, most investors are resolute in their belief that the markets will experience a crash similar to the 1987 crash. Remember this crash proved to be an enormous buying opportunity. Investors should face this primal fear, for market crashes have always proved to be buying opportunities, but the crowd is none the wiser hundreds of year later. Stupidity knows no limits.

poll on stock market crash

Lower numbers indicate that more individuals believe that a crash is inevitable and vice versa. At the current reading of roughly 13%, it means that 87% of investors think a crash is likely, which means if the markets crash, it will make for a unique buying opportunity. The crowd is always wrong in the long run. As far as the Tactical Investor is concerned, the current action is nowhere near a crash. A crash is nothing but a perspective. Every baby bull was born after a crash, and the stronger the deviation, the better the opportunity. If one had invested in top companies before the crash of 2008 and held through thick and thin and then deployed new capital when the market crashed one would have been sitting on a fortune today, clearly proving that crashes are not the end of the world but the beginning of the next massive opportunity.
Volatility is going to be a significant issue, so be ready to deal with 1500 point moves and when the Dow breaches 33,000 be prepared to deal with 3000 point moves in either direction over a short period. In some cases, the market could shed 3000 points in one week, and the bears will growl that the end is nigh, but if the trend is up, the only thing that will be nigh is their pride and bank accounts. Market Update Oct 19th, 2020
We spoke of this increased volatility in the last update and prior updates, and our outlook remains the same. Strong pullbacks should be viewed through a bullish lens, and the stronger the deviation, the better the opportunity. However, this is very important. Don’t expect every healthy pullback/correction to resolve itself ASAP, if that were the case; then everyone would be able to put this strategy into play. Sometimes, the media will go into maximum overdrive to add to the fear factor. The markets will appear to be in total turmoil (again this is a projected perception courtesy of mass media that the individual falsely assumes he/she has come up with) and the easiest thing to do will be to call it quits and head for the hills. And that is what the big players want everyone to do, for that is when massive bargains are found.
Here is something else to keep at mind, the big players never buy at the exact bottom because they have vast amounts of money, they deploy capital at various levels. In some cases, they take sizeable (initial )paper loses, but they are okay with this because they know that they will reap 10X on their investments in a few short years. This is why we never commit all our funds at one entry point; we divide the funds into three lots for one never knows when that beautiful opportunity will present itself. Secondly, we don’t try to time the bottom, we take advantage of aberrations, and the current action is nothing but an aberration when viewed through a long-term lens.

sentiment chart anxiety index

Bullish sentiment inched towards 3, but its still trading below its historical average. Bearish sentiment remained unchanged and neutral sentiment came in at 31. The crowd is uncertain for if they were bearish, they would be actively shorting the markets. Instead of shorting the markets, they are moving into cash, which means there is now a tidal wave of funds sitting in cash. There will be reversion towards the norm, and when that happens, this colossal war chest of money that is sitting on the side-lines will hit this market like a tsunami creating an epic melt-up.

The crowd is still uncertain, and over the long-run uncertainty, Trump’s negativity from an MP (Mass Psychology) perspective as it suggests that the markets will run a lot higher than even the most ardent of bulls could ever imagine.

The above data if one utilises the most basic principles of Mass Psychology, states that the masses are bloody lost. They don’t know what the hell is going on and so like blind rats they are hopping from one sinking ship to another in the hope of buying just a little bit more time. Market update Oct 19th, 2020

With a Fed that is hell-bent on printing as much money as they need, abnormally high uncertainty readings, massive amounts of cash sitting on the side-lines, and the possibility of a contested election. The only course of action that generates a positive outcome is to go against the grain; doing the opposite of what feels right (based on long-term timelines)

Uncertainty and fear pay poorly; only the man/woman that is willing to visualise opportunity where others can only envision disaster is the one that will make out like a bandit in the long run. This bull is a hybrid; it will not behave like a typical bull market, at times it might appear to act like a bear, at times like a dolphin and at times like a raging insane bull. However, if one plots a trend line through all these crazy gyrations, one will see that the markets are trending up.

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