Market Psychology & Value Investors – “Sell Everything”??? by Todd Sullivan
Calls like this are never right….
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Value Investors assess market psychology daily. It is in the disparity between fundamentals and market psychology that Value Investors see opportunity. Market psychology is reflected in daily pricing.
Rule 1: If the consensus is pessimistic as it continues to be today, then markets can only move higher.
Rule 2: Markets never top out till the consensus is optimistic.
Rule 3: Value Investors constantly double check that fundamentals disagree with consensus market psychology. Opportunity and the ‘margin of safety’ are strongest when fundamentals disagree the most with market psychology.
Consensus market psychology is always wrong. Even though Value Investors know this, they prefer to track fundamentals just to satisfy their naturally conservative nature. Gundlach’s ‘Sell Everything’ follows Soros’ and Icahn’s calls made a few months ago for a market top. The disagreement between fundamentals and market psychology is quite strong today.
Markets can only move higher from current levels as economic reports continue to support the Value Investor position.