Back on 10/14/2010 I wrote an article titled, “We’ll Never See Dow 10,000 Again”. It was about a guy I know who invests other people’s money for a living. The fellow made the crack about DOW 10k (not me). He was right for a while. But he is long and wrong today.
I bring this up for a reason. In the week before the debt ceiling deal about 99% of Wall Street was convinced there would be a last minute deal. They were also convinced that a big stock rally would be the end result. I heard it from the folks I talk to. We all heard it on the TV.
Last week’s “Sell on the news” reaction was a consequence of Uber-enthusiasm going into the “Ceiling Deal”. Today’s crap out is a consequence of S&P. I watched more TV today. I listened to all the smart guys I know on WS. They all had the same view; “Buy of a life time!”
Wall Street only understands earnings and top line sales. WS has no clue that what is driving equities the past few weeks has nothing to do with equities. It appears that the public sector finances of governments around the world are imploding at the moment. It doesn’t matter if APPL is trading at (only) 8Xs forward earnings. Not if governments are on fire.
I have no clue what happens next. I’m pretty sure that the “Pro” investors on Wall Street are still long, and yes, wrong. Usually that means we have lower to go. After all, those Smart Guys are not so smart in the end.