Joshua Brown wrote today, FIRE IN THE DISCO. Go read it if you haven’t, I’ll wait.
Welcome back. I am by no means a fundamental analysis but what I do know is that participation matters. The hard part about any type of analysis is not how people will react. It is about who is participating. Once you have some understanding of the participants your analysis will greatly improve.
Mr. Brown argues, along with others, that fundamentals are setting up for a decline in the market. The quality of analysis is proportionate to the quality/quantity of those that participate. One thing everyone can agree on is that participation is down or at least the quality. What we have is not necessarily a FIRE but the DJ is playing country, rock and sprinkling in some of that horrible music people insist on playing at weddings . I do not think we can say for certain a direction but we can all agree we have certain uncertainty.
I did not say anything new there, of course the market can do anything. But it is more likely that it does anything with low participation. People’s timeframes are getting shorter. My overall thesis, or the closest thing you will ever hear me talk about as “reason” for price movement, has been that a rally heals everything. Meaning that as prices rise demand will increase, attracting participants. This campaign has been successful at increasing prices, but not the return people were looking for in terms of participants.
What many people will find frustrating in this environment is that it is going to take a lot of creativity with an extreme emphasis on adaptability and learning. People will start to find out how much success they have had in the past is attributed to their skill or the market.
The input always affects the output over time. If you are making a cake and all you have is beef jerky and parsley it is going to be hard to convince people that what they are eating is in fact a cake for a long period of time.
Remember, there is always more money and contrarians out there they you can count. We are in or coming into an environment where it is smart to be an atheist in a foxhole. We will all get religion again one day but that day is not today.
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