Deserved reward or just deserts, usually unpleasant: He finally got his comeuppance for his misbehavior.
When I see the Russell 2000 getting hammered, I often think of all the failed revolutions throughout history. Sure, there are probably more professional traders in the small-caps and highflyers, but the index and a large chunk of its participants reflect that kind of us-against-the-powerful that underlines rebellion. I am not sure what the exact number is, but no doubt, many more would-be revolutions have failed than have succeeded, which makes the meltdown in the Russell even more compelling.
There is no doubt that the Russell was ahead of itself, no matter how one measures value, growth, and hype. In addition, there were no metrics which justified the extended run into 2014 but there was an old Wall Street golden rule: "Ride your winners until they collapse." Well, that collapse is here with the index in the midst of its worst multi-day drubbing in years. The question is whether what's happening is the beginning of a much more pronounced decline, with the recent action being only a precursor to the kind of comeuppance yet to come.
In the past, I have felt that certain selloffs in the Russell were orchestrated by the master of Wall Street, to put upstart investors in their place and off that self-directed train, forcing them back in line relying on the experts, instead of their gut and their commonsense. To that end, small investors tend to hold through peaks and sell into troughs. Getting in the game is not their weakness, and despite the lure of Joe Kennedy and the shoeshine kid novice, and the non-pro investors' worst sin is not coming to the party late - it's bolting at the wrong time when the pain is greatest.
Of course, it is easier said than done - not panicking. Moreover, hindsight is 20-20, and history is a great guide for the future. Even as more money trickles out of equities to bonds and emerging markets, this selloff is still about rotating out of small-cap names and highflyers, and into safe, or oversold equities.
Case in point:
It was only two months ago when investors figured that IBM was too much of a lumbering giant losing to the upstarts in the Cloud, while its management reluctantly trimmed its hardware businesses and even then, IBM's CEO told the world that hardware was still a critical part of Big Blue. IBM shares stumbled from $190, to a 52-week low of $172 in a matter of days.
Yesterday, IBM finished north of $192 a share.
Today, at 11:20 AM PT: Get the Market Movements in Advance: William's Edge Webinar for October 24th, 2014 | John Ransom
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Today, at 11:20 AM PT: Get the Market Movements in Advance; Williams Edge Webinar for October 20th, 2014 | John Ransom