Friday, March 07, 2008

I'm Afraid of the Absence of Fear

The MarketPsych Fear Index has been showing low Fear readings (see our Market Analysis page). This seems odd with stocks falling, the economy slowing, housing values falling, oil rising, and gold rising. Seems that inflation and low growth is coming -- a re-emergence of the old bogeyman: "Stagflation."

I double-checked this low reading by also looking at sentiment levels. Same result -- sentiment about the stock market is not so bad. I guess this makes sense considering the recent articles touting "Bargain stocks" and "Cheap shares."

The bad news, including falling stock prices, doesn't phase investors like it used to. It's like Learned Helplessness. Ironically, I'm worried by that lack of concern. It seems that investors are complacent about the bad news. As a long-time stock market investor, I've learned that we should take advantage of investor fear but avoid a complacent market.


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