Will Market Gains Be Erased?

Market Comments

One of our members, David, sent me an email today regarding some comments made by a Wells Fargo Analyst.   Apparently the gentleman (at Wells) made the case for the market giving back all of its gains made over the last three months.
While he might be right, one thing I’ve learned in this business is that there is no shortage of opinions; and boy can they vary!  The key is deciding which argument is more probable given the facts and crown mentality.

This can be easier said than done because even the most savvy investors and analysts can bring polarizing and sometimes completely opposite arguments, all of which can be extremely convincing.   Case and point would be Herbalife, where power investors Bill Ackman and Carl Icahn were (are) head to head, one thinking the company is a ponzi scheme that should be worth zilch and the other claiming that the company is undervalued….Talk about confusion!

While this may only seem to lead to perplexity among the masses, it’s actually what creates fair value in the markets.  Think about what would happen if everyone thought exactly the same thing?!  There wouldn’t be anyone to buy when others were selling and vice-versa and markets would just go straight up or down (how boring).

The analyst at Wells Fargo probably has some very good points and rationale for believing what he does and frankly, I think the probability of a market selloff is higher than a massive rally from these levels, but NO ONE knows for sure.

The bottom line is that you MUST inform yourself and seek the advice of people who know what they’re talking about and can at least make sense of a situation as well as envision the future of a company or economy based on facts coupled with an element of subjectivity.  Keep in mind that it’s not about what YOU believe, it’s what the masses will believe at the end of the day.

When it comes down to it, after all the fluff and posturing ends, earnings are the end all be all; and this earnings season will be watched closely as analysts and companies cannot continue to push back growth expectations without the market correcting.
We will have a front row seat to the action and will be able to see the story unfolding clearly!  Stay tuned as Q3 gets underway and we really see how America is doing.

As much as we want to hate Wall Street; it incubates, nurtures and empowers the biggest employers in the U.S. and results give us a VERY accurate look at just how we are really doing as a country.