April 5, 2016

How following the crowd can lead to losses

Buyers live higher and sellers live lower. This applies to human beings as well as machines.

Remember, the crowded trade was long the U.S. dollar three months ago (it didn't work out well). The crowded trade today is short the U.S. dollar.

Remember, the crowded trade was short the S&P 500 in January. The crowded trade today is to be long the S&P, which is up more than 240 points above the level of two-and-a-half months ago, and on the side of the Fed and the world's central bankers.

Extreme and crowded views often don't pay off.

I remain at the largest net short exposure in more than 12 months based on a fundamental view that global economic growth is imperiled, among other reasons.

And Wharton's Dr. Jeremy Siegel is bullish for 2016-17. Phew!

via thestreet.com/story/13513572/1/lessons-learned-again-madness-of-crowds-yellens-non-event-best-of-kass.html