Mr. Global since you take the time to post perhaps you could teach us some of what you know about raising 100's of millions and finding those types of opportunities. What exactly are you raising money for and how did you connect with them.
Smart money is long and short - problem is no one knows which is which! Reminds me of the graduation class (not mine) at med school where the dean implored humility in his soon to be practitioners." Ladies and gentlemen, of all the things we have taught you we can only be sure that 50% of it is actually true. The problem is we don't know which 50% that is." And everyone laughed, yet twenty years on, ask of those docs that graduated and they'll probably tell you that it wasn't too far from the truth.
There is no tellign where the smart money is, but you can tell where the big money (pension funds, mutual funds) is at. They're currently very hedged with short positions on futures. It's unlikely they are the ones buying up this market, and they won't be buying the dips when it tanks this time. Yes, I'm a bear and I'm not going to9 change my opinion just because some index managed to go up a bit this month.
Go up "a bit" ? Long and Long until the trend change, don't ask why as your first priority is right in the market and making money, not looking for reason behind why it is up/down ..
Well I'm not exactly short, either. I disagree with the notion one should not find the underlying reason for the momentum of the market. Considering that, I find the current upwards move to be entirely reasonable and logical, I had not expected a big correction or crash for the past year but in 2011 I definitely see one coming. I think the smart money is (still) long, but I don't think they are the ones who are buying this market now.
You will NOT be able to find out the real reason for the momentum of the market, indeed no single retail trader could. Also, there is no point to know it as well, as I said, the purpose of a trader is to make money, and not asking why (This is not one of the PhD project to find out the root cause of the market). The market getting slightly soft now, but the long term UP trend still not yet broken, I am holding on my Long Position, still haven't decided if I like to ADD more LONG Position.
I have to disagree to a point EMR. Like you, I have raised several million's of dollars (not even close to 100M) and it's been my experience that individuals who have that kind of money are just as dumb as the guy with the 2k trading account because they are too busy doing what they do -- treating patients, researching case law, or making widgets. They don't have the time, ability, or desire to study and learn anything about the markets. They pay someone else to do it for them, which is where you and I come in. However, within that pool of people are some "smart money" investors who choose to invest (trade) through another person as a form of diversification, or some other reason. In my experience, that is the true smart money. Right now, the smart money is long the market but at full attention, ready to pull the plug when they smell trouble. The rest rely on my judgment and I am currently long the market at full attention, ready to pull the plug when I smell trouble. I'd rather have to get back in than take a bath and if the market doesn't give me the opp to get back in then I wratchet up on the futures side for a while.
That's ridiculous. You're proposing that it's fine for a trader to be like a driver without a license. While it is certainly intuitive to drive and one really doesn't need training to move and steer the car, understanding traffic is why the license is a must. The unlicensed driver is like the trader who thinks he's everything in a boom and then loses everything again in the ensuing crash. Why? Because he didn't understand traffic flows and thus had no real predictive ability, but only a (temporarily) functioning system of pushing the gas and break peddles. And yes I know economists tend to be horrible traders, but that is simply because they're licensed drivers who can't drive. Sort of like old people, I guess. In general, the reason markets go up is because there is more money chasing the same stocks and they go down because of less. This creates the trend. If there is no fiscal expansion/contraction then stocks will range. Then we have sentiment and sometimes mass-hysteria which causes crashes and bubbles. In 1987 it crashed because asset valuation increases had greatly exceeded those of the money supply (due to sentiment). Then it obviously corrected a bit too zealously (due to sentiment). The "state of the economy" is also mostly irrelevant, although can impact of course the speed of a move though not the general direction. The key factor is that inflation usually goes along with a booming economy, and deflation to the opposite. However you can have fiscal expansion plus rising stock prices with economic dismality, such as we have now and some time during the depression of the '20's. If memory serves me, another big fall came after that. I don't think anyone is going to argue here that the economy has recovered anything like 50% since the bottom. To sum up, in breadth the market moves due to (in order of importance): -Money supply -Sentiment & Hysteria Note that Sentiment can do whatever and is predictable only to the extent that you can always reasonably assume that a contrarian position to an extreme is favorable. Money supply is far more predictable, although not by any means a "given". It depends on the central banks of the world. It is also my opinion that if there weren't so many morons, the indices would not have the kind of gyrations but instead move much more smoothly along the direction of money supply. Funny enough, it seems that without sentiment speculation would become logically impossible. Someone has to take the other side of a trade... By the way, I am talking about macro-economic trends so this does not apply to single stock trading in any way, where a lot of the performance does depend on the business qualities (although in a bear market perhaps not even the best performing business will have its share price rise, which is why I think individual stock investors generally should be long/short on good/bad businesses because it is not their business to predict the overall market, but relative success. Oh well.) To conclude, on any given day you can ask yourself where the market is related to money supply and sentiment. Today, the market is pretty far ahead of the money supply (imo) and sentiment is tremendously bullish (why?). This is the ideal situation for a big correction. By the way the best measure of long-term sentiment may be the market's P/E, because both price and earnings move with money supply. There's all sorts of surveys for short-term sentiment. Sorry for the long post.