“Never play cards with a man called Doc.  Never eat at a place called Mom’s.  Never sleep with a woman whose troubles are worse than your own.” – Nelson Algren, A Walk on the Wild Side

Fresh Fruit or Rotting Vegetables?

A subtle gas seems to always be vented into the atmosphere at the sunset of an extended bull market.  As the light fades, an odor that’s indiscernible from that of fresh fruit or rotting vegetables wafts down Wall Street.  You can almost smell it.  But what it is you smell is too faint to accurately characterize.

The Dow Jones Industrial Average (DJIA) closed at a record high of 26,616 on January 26 – nearly five months ago.  Since then it has swooned and spiked with uncertain direction.  Buying the dip at this juncture may not work out in your favor.

When the stock market peaked out in mid-2007, in the early days leading up to the 2008-09 crash, some of Wall Street’s best and brightest mistook the smell of the moderate initial decline for that of fresh fruit.  They bought the dip.  At the time, however, it was still unclear what the source of the subtle odor was.  Was it really fresh fruit?  Or was it actually rotting vegetables? Continue reading →