The Market is a Big, Fat, Drunken Biker
by Graham Summers
October 2, 2006
“I’m tell you buddy… I’m telling you, you guys, you guys sound awesome.”
The drunken behemoth of a biker had his arm around my shoulders. He’d been babbling the same compliments about my band for well over five minutes. I wasn’t too keen on continuing the conversation, but I wasn’t particularly interested in offending a 6 foot 5, 250 pound biker either.
After all, I was a kid touring the Midwest in a college funk band. I’d never drag raced a motorcycle. I had no tattoos… and I wasn’t missing any teeth. I was however, good at removing myself from situations without offending people.
Playing bars and clubs throughout the Midwest during college was fun, not only because I was doing something I enjoyed, I got to witness the results of mixing large quantities of alcohol with rednecks and bikers every night. Unfortunately, following the show, said bikers and rednecks always want to share their musical insights… over and over.
I’m sure you’re familiar with what I’m talking about. At some point all of us have been stuck talking to someone who keeps saying the same stuff over and over. Sometimes the repetition is alcohol-induced… other times it’s just general idiocy. Getting out of these situations is never fun or easy. But it’s something you simply have to do.
Right now, the market is that big, fat, drunken biker.
Last Monday, I forecast the beginning of a stock market correction. The S&P 500 promptly rallied in my face to hit a 52-week high of 1,340.
That level, 1,340, seems strangely familiar… probably because it’s roughly where the market was trading in early May, right before the first of several serious corrections. Another market indicator, the Volatility Index (VIX) indicates that investor sentiment is roughly where it in early May as well.
Basically, you could have fallen asleep from May 10 until today, and had no idea that time had passed. The market is doing the exact same thing it did four and a half months ago. Investors are complacent. Stocks are overbought and well overextended. And the talking heads are forecasting bigger and better gains to come.
Just like an annoying conversation with a drunken biker, at some point very soon, this situation will turn ugly. We need to duck out before then.
It’s time to smile, tighten your trailing stops, and stand back. We may be a bit early on this. But it sure beats being too late and learning what it’s like to have a few missing teeth of our own.
Good investing,
Graham
