The Big Disconnect

Panic hit with a vengeance last week and pored over to this morning. Don Hayes, who created the ARMS index, which measures extremes in the market both on the oversold side and the overbought side, said that the NASDAQ went over 7 on the oversold (the highest being 10). This is way over done. The reason I am focusing on the NASDAQ is that it takes out the big oil and large banks and gives you a more reliable indicator of overall action. No, I did not expect 11% declines; in fact, I have found no one in my profession did either. What really caused this was machines which are programmed to sell based on set parameters that do not take into their objective fundamental facts.

There is now 8.3 trillion dollars on the sideline; I have never seen true bear markets occur with as much liquidity as we have this morning. If you go back to the bottom of 2008 with the market in the same conditions as we have now, over the next two years you made a bundle. All of the great investors like a Warren Buffet follow a “when others get fearful, it is time for smart investors to get greedy.”

The market is producing an environment that Politicians fear:  voters hate everybody. Maybe this will light the fire to get meaningful Tax Reform and major reform to those entitlement programs that Politicians have not been willing to reform for years. The stock market is a powerful incentive due to the fact that it is a real reflection of the feelings of voters. Either Washington will listen and act or find another job.

We are in what I call “cowboy up “time, a time when investors have to tighten up the cinch, pull your hat down a little tighter and resist the panic of the Herd. It is a personality trait that all good investors learn over the years, but it never gets much easier it seems. Every time there is a new threat trying to knock over those valuable disciplines of the past. But history tells us to stay the course, and continue to rely on the instrument panel. These storms do die down, your patience and fortitude will be rewarded.



About billriley

Chief Executive Officer, Chief Compliance Officer A co-founder and shareholder, William Riley is a 33 year industry veteran, who observed, many years ago, that over time institutional investors typically outperform individual investors while accepting less risk. In his role as Chief Executive Officer, Bill works tirelessly to make the wealth management strategies used by the world’s wealthiest families and largest institutions available to our firm’s individual clients. Bill combines fundamental and technical analysis to minimize investment portfolio risk and maximize potential returns. He uses a variety of non-correlated asset classes, including alternative investments, to minimize portfolio volatility and seek absolute returns in down or flat markets. Finally, Bill believes in a comprehensive approach to wealth management that fully coordinates and seamlessly integrates portfolio management, risk management and asset protection, trust, estate, tax and charitable planning. Prior to co-founding Riley Wealth Management ,LLC, Bill held management positions at Merrill Lynch, UBS, Raymond James, Paine Webber and J.C. Bradford. Bill founded Fort Worth branches for Raymond James and J.C. Bradford. Prior to entering the financial services industry, Bill ran his families closely held businesses. Bill’s experience operating family businesses combined with his wealth management experience makes him uniquely qualified to advise entrepreneurs and business owners on a variety of matters including complex and sensitive issues relating to business succession. Bill’s degrees and designations included a Masters Degree in Business Administration (MBA), the Chartered Financial Consultant designation (ChFC), the Chartered Life Underwriter designation (CLU) and the Wealth Management Specialist designation (WMS). A Fort Worth native, Bill is a TCU alum and active in many civic and charitable organizations. Bill and his wife, Marsha, now reside in Colleyville, and they have four grown children and four grandchildren. When he is not working on portfolios or studying financial markets, Bill can be found on the golf courses of Ridglea Country Club.
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