Smart Money Acting Like Dumb Money

Smart Money Acting Like Dumb Money

Smart Money Getting Trounced by Dumb Money

As evidenced by the image below, the average holdings of Robinhood traders are up by 1.5% on average. However, some traders have made fortunes by buying right at the bottom when so-called experts like Buffett that represent the smart money, panicked like sheep. In fact, Buffett appears to have lost his touch reacting like a lemming and dumping his airline stocks right at the bottom. Secondly, instead of buying the panic as he was so fond of proclaiming in the best, he panicked and fled for the hills.

He has also made a host of questionable investment decisions and has lagged the SP 500 for years. What we stated is coming to pass, that many so-called experts are going to be left in the dust and follow the path of the dinosaurs.  Right now the small guy is thrashing big players like Buffett and this small chaps as evidenced by trades on Robinhood are buying low and selling high, something that seems to be eluding Buffet and other experts that keep proclaiming this market is destined to crash.

Many experts seem to agree that Dumb Money is beating the Smart Money

“While commission-free, low-dollar traders are often viewed as a group who tend to do the opposite of the right thing (to be a little more derisive, ‘dumb money’), the Robinhood data actually suggests the opposite,” George Pearkes, a macro strategist at Bespoke, wrote in a report.

“People are very dynamic in the way they trade,” Primozic said in an interview with Bloomberg Television. “They’ll jump on news very quickly — like, as it happens — so people are definitely, they have their ear to the ground and they’re trying to make the best trading decisions they can throughout the day.”

“It’s not unusual for us to see our clients rotating in and out of stocks after they make a run,” said Cruz. “They’ll take profits and find something that’s a little more beat-up and rotate into that.”  Yahoo Finance

smart money transactions

Market disorder leads to opportunity

In this environment of financial disorder, it feels almost natural to give in and state that resistance is futile. Well, that is exactly what the nefarious players at the top are hoping for. However, if one looks at the situation with clear eyes by removing the emotional factor, it starts to make sense. Once fear takes over and starts talking, logic does the walking and end result is destruction as in loss.

This is why the so-called wise money is paying the price for they assumed it was different this time. Instead of taking their advice, they acted like the masses. When it comes to the markets, once has to adapt or die, there is no middle ground.  We use the word the so-called smart money because they are not the real smart money, the real top players are the ones that orchestrated this coronavirus pandemic crash and when the markets were crashing, they came in and scooped up everything in sight. At this point, any monkey with a dart could beat 90% of stock market experts and do so with ease.

It started in 1973 when Princeton University professor Burton Malkiel claimed in his bestselling book, A Random Walk Down Wall Street, that “A blindfolded monkey throwing darts at a newspaper’s financial pages could select a portfolio that would do just as well as one carefully selected by experts.”

“Malkiel was wrong,” stated Rob Arnott, CEO of Research Affiliates, while speaking at the IMN Global Indexing and ETFs conference earlier this month. “The monkeys have done a much better job than both the experts and the stock market.” Forbes

Astute Trend Players

These top players that you never hear off, are very good trend players and unfortunately, they understand the concept of Mass Psychology very well.  The best way to rob a man is to make him believe he has only a set of given choices and to make him choose from those false set of choices.  All those choices lead to a negative outcome, but it creates the illusion of choice. The way out of this loop is to look outside the presented choices. How do you do this? First, you never accept anything that is being pushed out by the media. The media’s only function is to make the masses to believe that the false narrative is true. Once that is achieved; the masses have no choice; they just have the illusion of choice.

The attack against the masses is going to be brutal in nature, so be prepared to deal with a huge amount of negativity and the world is going to end type of hyperbolic predictions

Interesting take on the mass mindset

The slaves who toil in our offices and factories are invariably barely conscious of their enslavement. If they have any dreams, they are merely of ways of improving their slavery: having a good time on a Sunday; going to a dance in the evening; dressing up like a gentleman; and getting more money. Even if they are dissatisfied with their life, they think only of shortening the hours of work, or increasing their salaries and holidays—in a nutshell, all the trappings of the Socialist Utopia. They could never, even mentally, bring themselves to revolt against work itself.

 It is their God, and they do not dare oppose him even in thought. But Hugh was made of other stuff. He hated slavery. He always said that being a slave to work was the wrath of God. The very fibers of his being stirred with an awareness of this octopus, penetrating him with its tightening stranglehold. Quite apart from this, the thought of embellishing his slavery would never have occurred to him, nor was he the sort to delude himself with cheap distractions. Extracted from talks with the devil

 Stock market sentiment indicates Smart Money is wrong

The crowd is in a state of disarray; the crowd includes anyone and everyone that is sitting on the sidelines with cash.  As uncertainty is in the air, the astute investor should use every sharp pullback to load up on quality stocks.

Tactical Investor Take

Insiders have been using this massive pullback to purchase shares, and one way to measure the intensity of their buying is to check the sell to buy ratio. Any reading 2.00 is considered normal, and below 0.90 is considered as exceptionally bullish. So, what do you think the current ratio is; well, it’s at a mind-numbing 0.35, which means these guys are backing up the truck and purchasing shares?

So, what are the readings today? Based on very heavy transaction volume, Vickers’ benchmark NYSE/ASE One-Week Sell/Buy Ratio is 0.33, and the Total one-week reading is 0.35. Insiders are not just buying shares, they are devouring shares. Insiders behaved in a similar fashion in late-December 2018, after stocks crashed on Christmas Eve; in early 2016 when stocks also corrected; and in late 2008/early 2009, at the depths of the Great Recession correction. Those were spectacular times to buy stocks. Insiders seem to be telling us that today offers a similar opportunity.

The Fed has pulled a Houdini

It has flooded the markets with money and triggered demand destruction in several sectors. Fear is a powerful tool to employ, and the top players have used it with insane precision. It’s terrible news for the crowd but good news for the astute player. Sadly, everyone cannot win when it comes to life and investing in general.

There is a good chance that the Euro could end up trading not only on par with the dollar but well below the dollar, but that is a discussion for another day.  Just remember though, all of this free money comes at a price. What’s the price, you say? Personal freedom; Gestapo type forces start to emerge when the printing press runs amok. So given this trend, the US and many of the so-called top retirement places will continue to lose rankings. Fiat money and freedom are not a happy couple.

Our Indicators are trading in the extremely oversold ranges

Our indicators are now dangerously close to moving into the extremely oversold ranges. So it’s just a question of when a Mother of all buy signals is generated. As we stated before; the FOB (father of all buys) is a rare event, so we are not going to hold out for it. If it happens, it happens, if not, a MOB signal is not something to ignore.

The markets mounted an incredibly strong rally, so in light of that, we are going to adjust the universal trigger. The new universal trigger entry points for the Dow fall in the 20,550 to 21,000 ranges. Positions can be opened in all the pending plays we don’t have a position in. So, we have two trigger points; the first trigger point is for the stock to trade in the suggested ranges. The second trigger is for the Dow to trade in the above-suggested ranges. Market Update May 2, 2020