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Market Mania ... Really? By Charles Payne

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Like most common phrases used today, few know their origins or their original meaning. Suffice it to say, if pressed for a source always say it came from Shakespeare, but when you have time, look up a couple. Last week gold entered into a "bear market." We all know this is bad news, unless one is short the shiny metal, but where does the term come from. Back in California in the 1800's Spanish explorers created the sport of Bull & Bear fighting.

In Europe bears were often matched up against dogs in fights rigged for the bear, whose teeth were pulled and paws dulled, to lose to the ferocious dogs.

In California the blood sport caught on with everyone and became a popular after church event for the entire family. Researching the topic, it seems clear that when grizzlies couldn't be found small black bears were used and always lost. However, grizzlies were a different story. The most amazing of land predators, the grizzly had no fear of mankind. Of course, with the smallest coming in at 600 pounds and records of grizzlies that stood seven feet and weighed 2,000 pounds there was no need to be intimidated by any other species including man.

When the fight was strictly against a grizzly and wild Spanish bull it was thrilling but the bull almost always won.

Eventually, the sport lost its luster and was phased out, first in Los Angeles where it was initially prohibited on Sundays, and then within city limits. The last bull and bear fight in California probably occurred in 1881. Despite the notion the sport ended because of social consciousness, the fact is they eventually ran out of grizzly bears and wild Spanish bulls. The last California grizzly was shot and killed in 1866 while the last golden bear (state animal - logo) was killed in 1922.

In the 1850's New York Times writer Horace Greely saw a bull and bear match and decided to use it as a metaphor for the stock market.

So, it was a blood sport that now applies to the mood of the market and investors. I must say it's interesting to me that during pure match-ups the grizzly almost always won. It's really the opposite in the stock market when you consider all the ups and downs major indices are at all-time highs. Yet how appropriate is it for investors that bet on stocks to fall to be named after very proud animals that didn't back down. Taken one step further, it is one thing to feel bearish and another to go short. These are the market types that often fight to the death and are carried out of the arena.

Last week the bears fought harder but once again came up short despite news that often would send share prices lower. The crazy thing is there is no mania to this market. Investors aren't clamoring to get a piece of the action. Crowds aren't swelling. In fact, despite all the noise about the crash the market feels more like a walk through the park than a blood sport.

8,000 Dow Points and "We" Feel the Same - Lousy

The American Association of Individual Investors has a well known sentiment survey that in the past has been very helpful at pinpointing market tops and bottoms. For the most part the survey reflects what's pretty much known from an anecdotal point of view and what's oddly missing from the bear argument these days. Will there be a correction? Of course there will be scores of corrections and even a few bear markets thrown in the mix, too. But the bandwagon for a correction is as crowded as I've ever seen - for a variety of reasons there is lots of rooting for a crash.

One rationale for a crash is there is market mania. Say what? No there isn't market mania; there is hate mania but not stock market mania. The Fed argument has more credibility and I think that's still a year away before having the potential detrimental impact anticipated. But Main Street is yawning at this market or watching a lot of television because bullishness is the only thing crashing at the moment. In the latest AAII report bullishness stumbled 16.2% to a read of 19.2 while bearishness skyrocketed to 54.5, +26.3%.

Picking Tops

The AAII bullish number always peaked within a week of bull market tops (the week before the 2000 top the number hit a record read of 75%).

Not only does the latest read on investor sentiment suggest we are a long way from Main Street Mania the number is now at its lowest level since ... March 2009 - the market bottom. 8,000 points apart and yet investors feel the same way now about stocks as they did in the haze and dust and fear and panic of March 2009. This would be the first top where there was no volume, no enthusiasm and no pomp and circumstances.

Flight of Commodities

I find it interesting that everyone says the market is up because Central banks are printing money so the natural move is to hoard gold and find a bunker. I do think you should have hard assets to protect against inflation but the dooms day scenario is a long way off because America isn't going to crumble overnight. Moreover, gold has been up for a dozen years. The fact that gold is freefalling is worrisome on one hand but also good news on another.

Good in the sense pure speculators are being shaken out and we'll get to the point where it's only in strong (read long term) hands.

The move in gold is pressuring all commodities this morning, a move exacerbated by news China only grew at 7.7% versus consensus of 8.0%. I don't think the China news is a reflection of a nation where demand is flagging, but a nation where the government put inflation worries ahead of runaway growth. It's actually a smart move for China which still sports a rate of growth we could only admire from afar. In the meantime the news from China doesn't help commodities in general, although most commodities are pricing in China growth lower than 7.7%.

Logic would dictate gold would be higher even with Cyprus being pressured to dump 10.5 tons and Goldman calling for $1,545 this year and $1,240 next year, but logic doesn't always work out when it comes to investing. There is speculation the Federal Reserve is manipulating gold lower as a sign their policies haven't created inflation. I'm not sure I buy into that bit of scuttlebutt although there is no doubt inflation numbers as reported are manipulated.

I would simply say at the moment we have to watch this continue, but this move is why I've been asking investors over the last five years to have more than gold in their portfolios and to stop thinking America would slip into the Pacific Ocean overnight. The foundations of the country's greatness are under assault.

Capitalism, God, individualism and Constitutional freedoms are all being chipped away. These pillars are powerful and people that enjoy being Americans aren't going to roll over. But make no mistake; powerful people are trying to remove all four pillars.

I think everyone should still have up to 10% of their investing dollars in gold and or silver and other hard assets. There will even be a point to add aggressively to that number but I'm not sure when to pull that trigger. Certainly there is no need to try and pick a bottom on gold, let the dust settle.

Tax Day

Over the weekend, with a producer yelling "wrap" in my ear I was asked what I'm willing to pay in taxes. I said 50% is a "patriotic" number and got a ton of emails and tweets. I was being sarcastic to a point and I was saying all government taxes shouldn't exceed 50%.

But the fact is that number is high and should be stipulated government gets out of the business of picking winners and losers in industry. In addition the federal government should get out of the auto, housing and student loan businesses as well.

In the end, the more money government takes the more it spends and this administration needs even more money to build its paradise of fairness.

Today's Session

We aren't going to force the issue this morning. Stocks will follow commodities lower, but these are the sessions I like best as it's a chance to measure the resolve of the market.