The talk on the street continues to be Alibaba and its much anticipated IPO. This will be the biggest IPO the world has ever seen, and many are viewing this as a sign the stock market has topped. The rally since March 2009 is over.... or is it?
For a trader, calling a top in a stock can be a terrible experience. Stocks, markets, assets have a habit of increasing in value far beyond market participant expectations. As such, any trader who has been shorting stocks in anticipation of a market top has been losing his/her behind.... assuming they are actually trading at all.
We had the Twitter IPO that was supposed to crash markets.
Facebook was a sign that the top was in.
Even Good Ole Ralph Cramden has been calling for stocks to crash
Yet here we are again. Another "defining moment" for this rally. With stocks at record prices we are getting a record IPO. Alibaba. $BABA. And the pundits are all over it, calling this the top for the market.
Hey they may be right! At some point this market will drop. It will top.
Give credit where credit is due. Some have yet to call a top in this market, and if this is the top--- great call.
Others have been calling a top with each rip higher since the lows in march 2009. If this is the top.... well congrats.... you finally nailed it. No matter how wrong some financial tweeters are, give them credit for putting themselves out there and accepting the criticism that comes with it.
Should we care about the pundits calling for a top? I think we should. When everyone calls for a top, expects the market to drop, more often than not it does the opposite. Shorting anything in this market has been a very difficult task. For some they were built to go against the trend. They feel the need to short everything and hope this global central bank asset price inflation scheme will come crashing down. Hope is not an investment strategy.
Simply accepting the fact that central banks are gung ho on higher equity prices, whether you like what they are doing or not, has been a great strategy. You might not like Ben Bernancke, Yellen, or Abe Shinzo, but they have made it clear about inflating asset prices. Holding your nose and buying stocks is much better than recklessly shorting the market because you don't like what the FED is doing.
While I remain steadfast in what I've been saying over the years, I do think this market will collapse at some point. There is my back door statement. When the market finally does collapse I will be able to cheer with the bears, if there are any left at that point, like my NFL team just won the Superbowl. And unlike most the the bears out there who either have run out of money, or don't trade with their own money, I will be making a profit on the way down. Just like we've been doing on this rally to record prices.
Back before QE Infinite was vogue I penned this post, highlighting the path the market was on. I stated that there is no other option but to keep the easy money going forever. At some point this will create market turmoil of record proportions... but right now it's just going to keep creating higher stock prices and leave the top callers in the dust yet again.
