The old Wall Street saw says you’re supposed to buy when there’s blood in the streets.
But I have to ask — do you have the guts to pull the trigger?
Think back to a couple of recent market bottoms…
Were you buying stocks in spring 2009 when it looked as if the whole world was falling apart?
Were you a buyer in late 2011 after Europe hit the skids?
Few can answer “yes” to these questions. That’s understandable. During times of crisis, it’s all too easy to get sucked into the negative feedback loop. It takes incredible confidence and foresight to buy when others are fleeing the market in droves.
It’s no secret that the market’s been stuck in one of these anxiety-ridden cycles for years now. The suits in Washington have fumbled every pass since the credit crisis, injecting historic levels of stress on businesses and citizens. Record spending, health care reform, the debt ceiling and a fiscal cliff standoff are just a few of the uncertainties we’ve all endured.
Luckily, a research group called Economic Policy Uncertainty has quantified these concerns. And when you line up the spikes in the U.S. Policy Uncertainty Index (times when “business uncertainty over government policy” was at its highest), you see how policy worries led to long-term buying opportunities:
Since 2009, we’ve waded through a river of political dung of historic proportions. Political ineptitude has sparked record anxiety in the uncertainty index, culminating with an off-the-charts reading during the 2011 debt ceiling dispute. Current readings continue to hover above historic spikes from the first Gulf War and the Sept. 11 terrorist attacks.
Despite looming all-time highs, blood is still very much in these streets. The lost decade is slowly (and sometimes painfully) coming to an end.
for The Daily Reckoning
Greg Guenthner, CMT, is the managing editor of The Rude Awakening. Greg is a member of the Market Technicians Association and holds the Chartered Market Technician designation.
So, is the “Economic Uncertainty” coefficient called the “Higgs Boson”??
For of all John Law’s faults, he at least understood that he who holds hard assets wins the day. Addison took the liberty of grafting supporting evidence together from his book with Bill Bonner, Financial Reckoning Day. Read on to see how originators of some of the worst ideas can give us some good ones too...
Is arthritis really genetic or is there something else at the root of it? Stephen Petranek lays out the compelling science and a disturbing connection between red meat and arthritis.
Our friend David Stockman took to the airwaves yesterday to deliver one message: The “ill gotten” stock market gains of the last few years are going to end badly. When they do, it will be America’s long-awaited day of reckoning…
The Greek stock market is down 36% year to date; the risk of global contagion in the event of a Greek exit is very real. Ordinarily such a crisis would require a massive coordinated effort from global stakeholders, perhaps directed by the IMF or some other pan-national financial body. But not in this case. Mark O’Byrne has the full story…
Remember, the great commodity boom took more than a decade to play out. Prices skyrocketed across the board. But what goes up must eventually come down. Gold and silver lost their wings in 2013. Copper went into a death spiral late last year. And I don't have to tell you what's happened with oil over the past six months...