Those who are mindful of unfavorable capital risk have long since sold incredibly overbought equity markets. Those that remain are wild west traders and those that are either oblivious, or thinking that they can surf the Fed’s liquidity wave and get off before the next time it crashes. And then there are the hedge funds and financial advisers who always hold and allocate any new client capital into stock markets regardless of how high prices climb (except when prices have given back cycle gains and then they freeze or respond to client redemption’s and move to cash at the bottom just as opportunities become the most attractive). But since all these owners are already largely in, and new willing buyers are increasingly hard to find, transaction volumes today are at cycle lows just as prices push to cycle highs. When these inputs reverse (as they did in early 2003 and 2009) we will have a signal once more, of equity risk worth taking.
Source: Cory Venable, CMT, Venable Park Investment Counsel Inc.
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