Tuesday, January 18, 2011

More retail investors...Market Crash?

Was reading thru a discussion forum and people were citing the increased coverage of media reports on bullish retail investors late to the party as an INDICATION the market is going to Crash.

I beg to differ, the appearance of more late-comers retail investors(unlike the early retail investors like ourselves) does not fore-tell a crash.
It is actually just an indication of optimism and possibly exuberance.

Exuberance will only mean PRICES of stocks will fly higher and higher..
It can go on for years...

The CRASH comes only because of ECONOMIC UNCERTAINTY or ENVIRONMENT UNCERTAINTY.

So there is a difference.. is more retail investors a CAUSE of the Crash... or is it an EFFECT of the Optimism in animal spirits.

8 comments:

Temperament said...

Hi WJ,
Me think market euphoria is still quite far away. Why?
Have you witnessed any taxi drivers, market's uncles/aunties, food-court's workers and even our regular casino players get excited talking about the stock market?
Not yet right?
So as long as the ever lurking "Black Swan" doesn't appear out of nowhere, the market still has quite a long way to go.
Besides, the stock prices have not reached "unbelievable level."
Most of the PEs are still not eye-popping yet.
Ha! Ha!
This is only my opinion, not facts.

Wealth Journey said...

Hi Temperament,

I agreed with you that market euphoria is still not here.

I was just sharing my thought on why people like to link retail investors with market crashes.

Market crash like you say.. of Black Swan events or economic/environment uncertainty, not because more retail investors come online.

Singapore Man Of Leisure said...

When I was in Shanghai, I recall my company driver boasting to me confidently that Chinese Govt will not let the stock market crash before the Olympics.

I recall thinking that if everyone expects a certain event to happen, this event may not happen....

The Chinese Market crashed from 6,000 to 2,000 6 months before the Olympics opening.

For me, when I see lots of: "Huat lah! Chong lah! Sure make money predictions from "new" forum writers, I would start to be cautious.

Like what Temperament has said, when ordinary people become market experts.......

Wealth Journey said...

I considered myself an ordinary person just like the taxi driver or the fish monger or the auntie waiting for her kid.

Do you? :)

Temperament said...

Hi WJ,
We all are except the Elites of the nation; who by virtue of their position (put there by the people) earn million dollars each year.
But everyone one us has his/her normal daily conversational topics.
So in the West, they say when the shoe-shine boys give you tips about the market, it's high time to sell.
I am sure nobody means any offence to the shoe-shine boys.
So it's the same, no offence to our taxi drivers, etc...
We are all common people except the "ELITES".

Singapore Man Of Leisure said...

棉里藏针,一针见血
一时快语, 懊悔莫极
心中傲气, 有待减灭
金言相赠, 感激不尽

Wealth Journey said...

一字一语,你很用心
我的快语,莫放在心
做个朋友,大家谈心。

Haha...

Singapore Man Of Leisure said...

Cheers to your good health and happiness! It's good to be re-united with my family, and to make new friends :)