Shoe-shines and Wunderkinds

Have we reached the silly season?

The news is filled with movie starlets discovering the stock market and 16 year-old actresses day-trading from their iPhones. Are these signs of a bubble?

An old market saying goes, “When even shoeshine boys are giving stock tips, it’s time to sell.” The market is a discounting mechanism that incorporates not only the latest news, but our sentiments about the news. So big, emotional events like Pearl Harbor, 9/11, Neil Armstrong’s walk on the moon, or the Lehman Bankruptcy tend to magnify what we’re already feeling.

But market buzz can permeate the culture, and encourage otherwise sensible people to buy and sell on a whim. Until Friday the market had risen for 11 straight days, something that hadn’t happened since 1996. And market volatility has fallen to the lowest level in six years. Complacency and momentum are a powerful cocktail.

I have nothing against bubbles. They can be profitable if you have the good sense to leave the party before authorities show up. But what the wise do at the beginning, fools do in the end. When the music stops, be sure there’s a chair nearby.

Douglas R. Tengdin, CFA

Chief Investment Officer

By | 2013-03-18T09:55:34+00:00 March 18th, 2013|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. –
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