Given Friday’s “sell-off,” one might think the bears are ready to take the market down, to finally bring the top-heavy market to its knees.
- Friday’s action sure smacked of panic selling. Thus, the question of the day is if the problems in mo-mo-land will wind up causing investors of all sizes to start dumping stocks en masse.
Looking at the movement in the indices this morning, the VIX, and my trades, it is a seductive thought that the market just might have succumbed to the Sirens’ call, the breathless media’s incessant undertone that the rising market is an illusion, that there is no net underneath the highflying stocks, that one slip is all will take to bring the big-top down.
- Not helping the bull case was the much anticipated Jobs report number which failed to “wow” the market, coming in relatively in-line with expectations.
- The Dow suffered a triple digit point loss and the Nasdaq index continues to experience steeper losses compared to the other major indices. The Nasdaq index is now down more than five percent from its 14-year high of 4,371 recorded not even a month ago, on March 6.
The talk of the town is the market is headed down because the “big boys and girls” are firing up the algos to sell the momentum names in biotech, Internet, and social media. Given the so-far-this-year huge downside to Amazon, Yelp, and Twitter, it is hard to disagree that these stocks are selling en masse and selling hard, but just because the “momentum” stocks are being oversold, does it mean the big-top is coming down?
To answer the question, I have to switch metaphors, to one less fun, to one more base, to one that paints the dark nature of the market …
The jungle is an incredibly diverse place, filled with more species than one can imagine, and it is true that the largest carnivores can cause panic when on the prowl, but when they find their prey and make the kill, the rest of the jungle settles down, but not completely. The normal quiet of the jungle night carries the sound of the vultures and hyenas that trail after the big hunters finishing the job. So when a kill is made, expect that the “noise” will go on throughout the night.
The market is like a jungle, for sure and right now the big carnivores are on the prowl. We should expect that a degree of panic is now happening. We should expect that when the “killing” is done, the big hunters and their followers will settle down for sleep and the rest of the jungle inhabitants will go back to doing what they do, which keeps the ecosystem in balance.
- Big retailers are muscling in on the likes of Visa, MasterCard and Google in a fiercely competitive and growing mobile payment market that promises to cut transaction costs and increase customer loyalty.
Like the jungle, the market is subject to evolution. Species and companies evolve to adapt to the changing environment and those that do adapt survive to compete with other survivors, which keeps the whole system healthier. The idea that Visa and MasterCard are now subject to fierce competition seems almost impossible. After all, these companies have dominated the “virtual money” market for well over a half a century.
- Stores such as British supermarket Tesco and France’s Auchan hope their “digital wallets” – apps which allow users to pay with their smartphones rather than cash or cards – will also give them more comprehensive data about customers’ shopping habits than ever before so they can target advertising.
Will the new credit fly? Will shoppers adapt to the changing environment? And how will it work? Will you simply slide your phone across a reader, or will you have to do something more elaborate for security purposes? Will there be interest charged or will the process be similar to that of debit cards?
All of the above questions will be answered soon because the change is coming. The ubiquity of smartphones (powerful computers) is changing everything and fast. It is similar to the big trucks and huge machines that are ripping apart the jungles around the world. The species within those ecosystems will either adapt or die.
If the consumer accepts the use of smartphones as credit cards, then the question will become: how will Visa and MasterCard evolve, how will they adapt? After all, they make their money charging the consumer interest for the ease of buying.
The market is more strongly in the red now, which means the big carnivores are still prowling about and the rest of the jungle is panicked. The trick is that you don’t panic, that you keep your cool, stay alert, be quiet, and when the big cat is gone and the jackals have cleaned up the kill, be ready for life as we know it to begin again. Remember, the big-top is still up and the circus will go on (could not resist).
Trade in the day; Invest in your life …
