I spent a over two hours yesterday interviewing Justin Mamis — the famed technician, author and adviser to big money — on his career and market approach. Its absolutely fascinating stuff.

At 81, he comes in the city each week to play squash. I am looking forward to doing part II with him next week.

While we wait for that post to go up, here is an excerpt from his most recent commentary:

“We have, on a Post-It scrap of paper left over from her previous life at MER, a scribbled reminder to ourself, written last spring, and stuck under our plastic desk blotter, alongside various phone numbers and business cards. It reads: “The more enthusiasm, the closer to a Top –”

Written when enthusiasm was a stranger, and yet share prices were going up, that’s all it needed to say. The public has been almost totally missing during the entire rally from March ’09. But instead of sulking, they’ve successfully loaded up on fixed income stuff, including, so we are told, a massive (for them) amount of Treasuries, preferreds, and all sorts of fancy new-fangled stuff, with some of the more venturesome discovering municipals, and have only recently started to believe the brokerage sales pitch that they should own dividend-paying familiar big cap stocks such as, say, JNJ or PG. In reality, that public on the sidelines has done well by protecting the resources of its collective self, especially since stocks themselves were not going up well, even though they didn’t want to go down.

But now, ah now, now it seems safe. It isn’t that the public knows that the Fed is right, or that the Republicans can save the world, it is simply that the public has seen the stock market suddenly go up in remarkably lively, even exuberant, fashion … and that seems to say, in bold headlines, that stocks are safe again, and can be bought. That sequence, from “I’ll never buy a share of stock ever again,” to believing it’s okay now, is how it has worked in past cycles, and evidently is starting to work today.”

Great stuff . . .

Category: Markets, Psychology

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

12 Responses to “Justin Mamis: The More Enthusiasm, the Closer to a Top”

  1. The next para is:

    “We deal in the stock market per se. It is not our province to know more than that. “Wall Street” used to literally stand for that building at the corner of Wall and Broad (the rest was simply “downtown”), a broad indoor playing field, with men (no women in those days) who had never graduated from high school but when they were sixteen got jobs as runners on the floor of the Exchange, and came eventually to wear elegantly tailored suits and silk neckties as specialists successfully nursing various economic and trading trends along. Given the shenanigans nowadays, including, as the newspaper reported the other day, manipulating the silver market, the specialists we knew a generation or two ago were the most honest men we ever met. They traded hundreds of thousands of shares back and forth, on a handshake, on each other’s word. Try that with today’s Congress.”

  2. dss says:

    Justin Mamis is a national treasure and a true gentleman as well.

  3. Super-Anon says:

    I think the key question now is does the public get back into the stock market and send it higher before the bond market and currency market shut it down?

    In the end if creditors lose faith in the US it doesn’t matter what the public thinks about stocks.

  4. Super-Anon says:

    BTW if anyone cares my plan is to hold on to the few PUTs I bought yesterday unless we get a bond rally that’s not driven by fear. Then I’ll sell them.

    In the past trading this type of scenario in this way has worked pretty well for me.

    If something works twice try it again!

  5. Jack Damn says:

    Justin Mamis is brilliant. Love his work.

  6. obsvr-1 says:

    You think MS is a bit enthusiastic …

    Morgan Stanley Says Equities Are ‘Crazy Cheap’

    http://www.cnbc.com/id/40113027

  7. hammerandtong2001 says:

    “The public missed nearly the entire rally from March ’09…”

    You bet your ass they did. And after the 2001 CRASH and the 2008 CRASH, it looks to me like the public has learned a lesson about Wall Street and the magic manipulators of stock prices.

    Great-grandma’s approach never failed. And while it sure didn’t make her rich, it did mean there was always milk in the frig, bread in the bread box and butter in the butter dish.

    Cash in the mattress = peace of mind.

    She never met anybody who got rich in the stock market — sort of like meeting someone who got hit by lightening and lived to tell the tale.

    I think a big chunk of “the public” has simply given up on Wall Street and the stock market.

    .

  8. “Au @ U$D ~1400 (?), suitable for ‘Value’ Investors..” –Chowderhead on CNBS (of recent vintage)

  9. [...] – Justin Mamis: the more enthusiasm, the closer to a top. [...]

  10. rdhall3637 says:

    Wonderful insight on enthusiasm, but that has zero value when it comes to making investment decisions. Here’s why: 1) How the h(&) can you measure enthusiasm accurately? Watch CNBC?? Watch magazine covers? 2) Ok, so you found a way to measure it somehow… when do you start selling? And, if you are wrong, when do you get back in as it continues higher? And if you are correct and the market tanks, when do you get back in?

    This type of investing sounds very noble and enlightened, but you might as well go to Vegas and have more fun with your money. Moving money around based on “enthusiasm” is not investing, it is gambling.

    Set a strategy, a set of clear rules, of when you buy and when you sell. Stick to those rules for a long time and see if you can make money. That’s how you trade. If you want to invest, buy stock and hold it forever until you need the money. It’s that simple..