Something's Wrong Here: Where's the Fear?

Roger Nusbaum submits: Palpable fear is conspicuously absent from this week's events. My gut says we may have increased volatility for the short run as a result of the decline on Tuesday. More volatility, however, does not have to result in a meaningful decline from here.

For now I don't feel it necessary to outguess this; relative to the big picture, the move is really not that big. In fact it is small, even if it does not feel that way. Well, so far anyway.

One thing I learned this week, and actually last spring but never mentioned it, was that Singapore may not be the safe haven that its fans think it is. The equity market got pasted this week and last spring.

The Sing dollar (the red lines on the chart below), on the other hand, actually went up slightly. Last spring the Sing dollar weakened slightly, but was far less volatile than most emerging market currencies.

So currency would seem to be the thing but for now, there is no way for equity exchange investors to capture the Sing dollar as a pure play for the bomb shelter portion of the portfolio.

One reader asked why gold failed to go up during Tuesday's decline. While there can only be theories or guesses about this, one thing is true: this was just a market event. There was no terror, no default and nothing new in any of the wars going on. It was a market event with a big part of it coming from worry that speculation might be discouraged in China.

The amount of fear, as I mentioned above, is less than what I might have expected. Maybe there is something to that notion?

Comments

[7c-ranch:]

There is no fear because an incredibly large percentage of retail investors are in short term bonds, balanced funds and equity income funds. Look at the fund allocation of major brokers. The rest of this is noise from those whose business it is to game the market. This is very different than 2001.

2007 Mar 02 10:57 PM

[Roger Nusbaum:]

Different than 2001? I agree completely. Interesting comment about brokerage allocations. I wonder how many front line sales people at the wirehouses actually utilize the model portfolio from the strategist at the top. This would be fascinating to study.

2007 Mar 03 06:56 PM