After this week’s excitement, many will be wondering if this is it for the bull market.
I’ve survived every gyration for 20 years, and with each iteration, my arsenal of tools expands. It no longer matters to me whether a market is bull or bear. At this point, I see it all as “risk management”.
But still, some words of wisdom never go out of style.

Mark Tinker: Expert View

The headlines about the Amaranth hedge fund need no repeating here. But what is clear is that often, buying something on the basis that someone else will buy it off you at a higher price is to believe in the bigger fool theory – the idea that even if you are a fool to buy, a bigger fool will come along shortly.
What always happens is that there comes a time when the bigger fool fails to turn up and the speculative buyer becomes a forced seller.
It should also be appreciated that most of the sharp short-term moves in markets are due to the markets themselves – what I like to think of as market mechanics – rather than any change in the economic fundamentals. — October 15, 2006, Expert View

The first essay was written by Mark Tinker of AXA Framlington. He’s one of the top strategists in the U.K., a personal favorite.
You can see his latest interview on CNBC Squawkbox Europe with Geoff Cutmore [LINK] or all of his appearances on demand at CNBC Plus.

Justin Mamis: The Philosophy of Tops

Excerpt from the Mamis Letter, The Philosophy of Tops:

Everyone kept saying ‘a top is not in place yet.’ They persistently pointed to the ‘normally reached’ levels of this or that statistic that were not yet there to reinforce their desire to remain bullish. … Apart from statistical measures of increasing blindness, this unwillingness to acknowledge what they themselves were already feeling revealed a comfortableness, a confidence, a conviction that whatever was happening — short-term survivable dips — would continue … until ‘the top,’ like a strip tease artiste of our youth would with decorum appear on stage, bow, and then, accompanied by applause from all the bulls eager to cash in on their excitement, would begin to twirl its statistical tassels in front of everyone.
I’ve gotten so old I can’t remember the names of those ladies at the Old Howard, but I can remember that all you got was a flash of this or that, before they waltzed off. Stock market tops are like that. You know it’s there somewhere if you squint hard enough, but you never quite see it, so you keep waiting for more. And then, in the end, as the curtain comes down on the bull market you realize that the one rule about tops is not that they provide this or that signal, but that they come before anyone is ready. — July, 1987, The Philosophy of Tops

Ain’t that the truth.