No Bark, No Bite?

By Charles Payne, CEO & Principal Analyst

Sherlock Holmes had the dog that would not bark and investors have a rally that would not bark, too. Maybe it’s a good thing, although I have to say that I am shocked at how many people are telling me they are afraid. The more the market moves up the more afraid they become. I have subscribers voicing fear even as we send out tons of profit alerts. I suspect that the same wall of worry that stocks are climbing is casting a dark shadow over investors. The thing that bothers me most about this is that public opinion would shift dramatically at Dow 14,000 and then the overwhelming majority of people worried right now would be prepared to buy stocks. This is interesting stuff, and underscores the role of behavior with respect to the stock market. For me, it’s really a lot of work. I’ve been holding hands throughout this rally, practically forcing people to stay the course.

Ironically, the more they benefit the more they feel you-know-what is going to hit the fan any day now. To be sure we all should be afraid of fiscal and monetary policies that have failed, for the most part, and have chipped away at chances of prosperity for our children. There seems to be a last push to get through what many see as deficit-swelling, anti-business proposals that would bring the economy to its knees. Today saw the passage of the $17.6 billion jobs bill, which should have marginal impact on businesses. I share many of the concerns but I’m more concerned about all the people that keep NOT MAKING MONEY. Trying to pinpoint when the dam breaks is difficult, and when you have made no money, probably lost much over the past decade, there has to be a greater sense of urgency and risk-taking.

On that note, the bill passed today will exempt employers from making 6.2% social security contributions and pay $1,000 for employees…both of these are for new employees only. No business I know is going to hire people they don’t need right now, particularly small businesses. The bill is good if you already planned to hire but it’s not going to spark extraordinary growth.

Then there’s healthcare reform, which is getting closer to being rammed down the throats of Americans. Representative Dennis Kucinich changed his mind today after a ride on Air Force One. This is how flimsy principles are on Capitol Hill; at least others held out for more lucrative payoffs. I will admit that passage of this bill will not be good for the economy or the stock market, but it kicks in many years from now so a pullback could create a buying opportunity.

Be careful if this scenario plays out…a pullback might be short-lived and not underscore your greatest fears, after all.

I love that the market is up without fanfare but worry at how many people are missing out. I’m sure at some point they’ll console themselves when the market crashes or gold hits $1,800 an ounce…I would like to take advantage of all those things, but the one that is working right now are equities.

Also of concern is the fundamental justification for the rally, and like other concerns this isn’t fairy tale stuff. The economy isn’t growing by leaps and bounds and will not for a long time. But the market can discount this stuff for a long time, especially if there are signs of moderate growth. Underscoring the tepidness of the economy is today’s petroleum readings.

We are very nimble, or try to be, and even our long-term ideas we ask subscribers to exit faster than in the past. But, we understand the need to fight through fear and individual bias and focus on making money. 2009 saw too many people watch from the sidelines; so far this year it’s no different. Even people that are making money are so worried they’d rather bail then risk getting hammered. I hate to say it but these emotional outbursts are buy signals. Part of me feels better when we hear people are willing to watch the parade from the sidelines because historically individual investors have been dead wrong. It hurts me, though, when our subscribers send return emails to take profits back saying they are cowering in fear.

I have to keep it real and be a straight shooter. You are right to worry, but missing the rally last year and this year is a shame. Maybe the rally doesn’t have any bite, hence the muted bark, but when the day comes for big concern we hope to be sitting on huge financial gains and ready to shift into a different game plan.

Charles Payne is the CEO and Principal Analyst of Wall Street Strategies . This post was republished from his company’s column, WStreet Market Commentary.