Justin Mamis: The More Enthusiasm, the Closer to a Top

I spent a over two hours yesterday interviewing Justin Mamis — the famed technician, author and adviser to big money — on his career and market approach. Its absolutely fascinating stuff.

At 81, he comes in the city each week to play squash. I am looking forward to doing part II with him next week.

While we wait for that post to go up, here is an excerpt from his most recent commentary:

“We have, on a Post-It scrap of paper left over from her previous life at MER, a scribbled reminder to ourself, written last spring, and stuck under our plastic desk blotter, alongside various phone numbers and business cards. It reads: “The more enthusiasm, the closer to a Top –”

Written when enthusiasm was a stranger, and yet share prices were going up, that’s all it needed to say. The public has been almost totally missing during the entire rally from March ’09. But instead of sulking, they’ve successfully loaded up on fixed income stuff, including, so we are told, a massive (for them) amount of Treasuries, preferreds, and all sorts of fancy new-fangled stuff, with some of the more venturesome discovering municipals, and have only recently started to believe the brokerage sales pitch that they should own dividend-paying familiar big cap stocks such as, say, JNJ or PG. In reality, that public on the sidelines has done well by protecting the resources of its collective self, especially since stocks themselves were not going up well, even though they didn’t want to go down.

But now, ah now, now it seems safe. It isn’t that the public knows that the Fed is right, or that the Republicans can save the world, it is simply that the public has seen the stock market suddenly go up in remarkably lively, even exuberant, fashion … and that seems to say, in bold headlines, that stocks are safe again, and can be bought. That sequence, from “I’ll never buy a share of stock ever again,” to believing it’s okay now, is how it has worked in past cycles, and evidently is starting to work today.”

Great stuff . . .

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