A number of years ago I was working as a Wall Street pundit and my job required me to read the output of other commentators.
I remember a former banker turned market guru who continually pounded the table about something called the Hindenburg Omen. The year was 2003 and the market was taking advantage of the fear of WMD and anthrax to rally like crazy.
The guru had more indicators and statistics than I had ever seen, but despite his 20 colorful pages of weekly analysis he was continually wrong. Every time he mentioned the Hindenburg Omen the market rallied, so I took to using his apocalyptic warnings as contrary indicators.
NEVER WASTE A CRISIS
The Hindenburg Omen made the headlines again this week. It has a reputation for appearing before crashes or panics. The operational strategy on Wall Street, however, is to never let a good crisis go to waste. To wit, the financial storm of 2007-2009 is still fueling one of the strongest bull markets in history.
There are two types of fear mongering one encounters during market cycles and they arise from two groups of people with different qualifications.
In Bear markets, fear grips the investing public. Skyrockets of hope periodically illuminate the financial firmament, but eventually the relentless selling convinces the last self-directed investor to go to cash and find a good mattress.
In Bull markets, on the other hand, fear is the nagging subtext of the experts who continually call the top. A seemingly endless stream of mysterious relief rallies invalidates their Icebergs and Zeppelins until the last pessimist is converted to the bullish cause.
LISTEN FOR THE BELL
Wall Street will find a way to keep the pessimism alive as long as possible because it is the engine that drives markets higher. When the last pessimist is converted they usually ring some sort of bell on the NYSE or NASDAQ. If you listen closely, one day you will hear it, but not this week or next.
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