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Potential Buying Panic?

Posted By Barry Ritholtz On September 3, 2003 @ 2:27 pm In Finance | Comments Disabled

An interesting view from the professional *OPM class:

Many professional investors have thought that the market might have the usual fall meltdown, and they were holding back capital on the hope of buying at better prices in October. Now they have to rethink their tactics, because every day they keep cash on the sidelines could be a day that their portfolios underperform their peers. Potentially, said Lowry Reports analyst Richard Dickson, this could lead to a buying panic.

But aren’t stocks pricey looking here? That’s a view that many money managers share, but it isn’t likely to keep them from buying. They recognize that the stocks are trading more technically than fundamentally, and they also recognize that with the economy in the midst of a growth spurt, the market is going to find it easy to look past steep valuations.

They know that while price may come back to haunt the market, it may not happen this year. And losing your job because you missed out on the rally — even if your bearish view is ultimately proved right — isn’t something anyone wants.
-Technically Speaking, the Market Looks Good [1]

*OPM= Other People’s Money

Quite frankly, I cannot fault anything to fault in Lowry’s perspective. It’s hard to stay out of market in the face of historical levels of stimulus.

As Keynes noted, the market can stay irrational far longer than you can stay solvent. Now, we can add unemployed to that view; Fund managers so totally fear missing a quarter (despite valuations or fund charter, apparently) that they may be compelled to participate regardless.


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[1] Technically Speaking, the Market Looks Good: http://money.cnn.com/2003/09/03/commentary/bidask/bidask/index.htm

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