The Price of Arrogance in Markets

This post isn’t directed at anyone specifically, we have all committed the cardinal sin of exhibiting arrogance towards the market, without fail swift punishment was dealt out in order to remind us who was in charge. As market participants, the more invincible we feel the more likely a “correction” in results is to befall us. I have had my fair share of these “corrections” over the years and as soon as I begin to hear myself becoming overconfident and talking about market forecasts with a high degree of certainty I check myself and take a step back.

Recently, we have witnessed the bears become reinvigorated with a new found sense of self worth and conviction in their doom & gloom thesis. This post is not about market forecasts, in fact, I am more uncertain about where equities are headed than I have been in months. Instead I would like to focus on the tremendous amount of arrogance and taunting of Mr. Market from the bearish camp in recent weeks. Sure, the bears have been right and the market fell apart in early August. The bears rightful reward should have been an embarrassment of riches from their bearish bets. However, that didn’t seem to be enough for many of them. Many appeared all too sure of themselves that equities were headed much lower and that anyone who was long must be completely insane.

It is this level of arrogance and certainty displayed by the bears toward the market that made a rally such as the one we have witnessed over the past two days feel more correct than the charts and economic fundamentals would otherwise indicate. Always remember: Arrogance and overconfidence have no place in markets, just when you are most certain it is usually time to double-check your thesis.

“There is only one side of the market and it is not the bull side or the bear side, but the right side.” Jesse Livermore

 

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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