Caution: Investors Are Complacent

Investors are either remarkably resilient or they just don’t give a darn anymore.

Think about it… There is more potential for disruption in the financial markets right now than there ever has been…

Europe is on the verge of imploding. And many of the largest European banks are teetering on the edge of the abyss.

California’s municipalities are declaring bankruptcy one by one.

[ad#Google Adsense 336×280-IA]Agricultural commodity prices are skyrocketing.

Commodity trading firms like MF Global and PFG Best are stealing customers’ money.

Corporate earnings are falling.

Multinational banks are openly colluding to “fix” key interest rate levels.

China is failing.

The U.S. government’s deficit spending is spiraling out of control… The economy is drifting into a recession… And tax rates are set to ratchet higher.

Any one of these conditions should be enough to prompt investors to refill their Prozac prescriptions. All of them together should get us talking about Armageddon, Mayan prophecies, and little spaceships coming just in time to take away the chosen few before the earth erupts into a ball of flames.

But no one really cares. This is what Mad magazine cover boy Alfred E. Newman would call a “What, Me Worry?” stock market. Just take a look at this chart of Wall Street’s fear index…

Despite all the rumblings in the world, the Volatility Index (VIX) is barely up off its 52-week low. This displays an amazing amount of investor complacency.

I’ll admit, I’m usually among the first to remind investors that the world has a habit of not coming to an end. Things are never as bad as we make them out to be. And somehow, we’ll find a way through this mess. But that reminder usually happens when there’s blood in the streets, investors are panicking, and traders have a chance to buy stocks at remarkably depressed levels.

That isn’t the case right now. And frankly, the lack of fear in the market scares the heck out of me.

Maybe all of these problems have been around long enough that we’re just conditioned to accept them. Or maybe investors truly believe the “smartest people in the room” will figure out a solution.

I’m not so sure about that just yet. Economic problems usually don’t get solved until there’s some sort of a panic that provides the smartest people in the room with a little motivation. By the look of the VIX chart, we’re a long way away from panic levels.

Of course, investor fear has a nasty habit of accelerating higher suddenly and without much warning. As you can see in the chart above, the VIX spiked higher last July. It wouldn’t surprise me to see something similar this year.

When people do start to panic, I’ll be back to singing the same ol’ tune – the world has a habit of not coming to an end. If we do get a spike in the VIX and a panic-induced selloff in stock prices, remember the prediction I made [earlier this past week]… and be ready to buy.

Best regards and good trading,

Jeff Clark

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Source: The Growth Stock Wire