In business one needs to look around and survey the landscape. There are times you look across a great distance and you see the heat waves rising from the flats in which it distorts your view on things off in the distance. You just can’t get a clear view. Then there are those rare times you look and you say to yourself: “Am I seeing things or what?” If it doesn’t make sense, and your life (or business) depends on what you do next, you’re going to need and make a decision. But what to do or just as important what not to do is the critical question. Because if you’re wrong it could be the last decision you ever make. Relying on some form of adjunct business awareness is not something you can leave to chance. Keeping an eye on the horizon for any changes is a crucial discipline you always need to hone. Your livelihood depends on it.
The financial markets have once again seemingly levitated above the horizon to heights one just thought wouldn’t be seen for quite a while never mind today. Although most people know of the S&P 500 very few truly understand it. They hear it on the television, or radio, and they also read about it in the papers. However when it goes up or down I would say nearly all 401K investors don’t understand what truly is driving the markets. I could go on for pages to explain but for this discussion let’s just use the reference point of most just don’t know. They leave that up to what they’ll refer to as their “Financial Planner.”
So here’s my rub and why I think one should once again pay very, very, very, (did I say very?) close attention to the financial markets as of today.
There is a proxy for the NASDAQ® named the Q’s. It is an ETF and the symbol for it is QQQ. Many one way or another are usually invested in it through their retirement holdings. Now regardless if you know or you don’t have a real grip on how stocks, bonds, and other financial instruments correlate to each other doesn’t matter. If I were to tell you that Monday of this week that ETF which is the financial trading instrument for the technology sector. (Think Apple®, IBM®, and all the others) made a new high for not just the year. But higher than what this sector represented in the dot-com era, and higher than it was in 2007 before the markets melted down what would you think?
To go along with that same question let me add this. Not only did this market for the dot com’s hit new lifetime highs, but the S&P 500 also made new yearly highs. And to top it off as these markets are going higher, and higher. Redemption (Think people taking their money out of their 401K’s) is also going higher, and higher. In other words, the higher this market is going, the more people are getting out. Something is wrong with that picture.
I think a very troubling phenom is materializing that all the so-called “smart crowd” are missing. People whom were invested, and stayed invested when the great crash happened in 2008 are saying “Phew, I’ll take my money now please. Cash me out! I’m not going to risk that ever happening again.”
I could be totally wrong on this subject, but I think I have just as much tangible evidence to bolster my argument as the market mavens do. Something here is amiss. Oh and by the way, that ETF is also the very same instrument that contains the company that was going to bring everyone back to the markets. That company? Facebook®.
Do I have your attention now?
© 2012 Mark St.Cyr