Yesterday I discovered a turkey carcass on the hillside behind my house.
I guess coyotes celebrate Thanksgiving, too.
On the previous morning, I stood on my porch and watched a flock of wild turkeys scratching around my backyard, hunting for whatever it is that turkeys hunt for. It seemed odd to me that these birds felt so comfortable in my presence.
Didn’t they know Thanksgiving was coming up? Didn’t they know I was planning to eat a relative of theirs? Didn’t they fear that they could end up on the menu?
I ventured off the porch and walked out among the feathered creatures. They hardly noticed me.
Oh sure, if I got within a few feet of any of them, the flock would saunter away in the opposite direction. But, rather than cackling and flapping their wings and scattering, they casually just strolled away – putting a little extra distance between us.
Turkeys flocking right outside my home
“Pretty darned relaxed,” I thought – for turkeys to be so fearless and complacent this close to Thanksgiving.
They reminded me of investors.
On Wednesday, the Volatility Index (VIX) – the best tool for measuring fear in the marketplace – fell to 11.49. That’s near its lowest level for the year…
Investors, just like the turkeys that frolicked in my backyard, are relaxed – maybe too relaxed.
Of course, that’s what happens when the stock market makes new highs just about every week. That’s what happens when the biggest declines we get are less than 1%, and the market recovers those losses within just a few days.
Investors, like country club turkeys, stop worrying about the potential dangers of their environment.
We’ve been warning about the danger of complacency a lot lately. But, in a raging bull market, no one really wants to hear that sort of thing.
It’s kind of like the grandmother who hurries through the sand to tell all the teenagers at the beach party to wear sunscreen. The teenagers nod politely and thank her for the advice, but then they roll their eyes once she moves on.
Of course, at the end of the day, someone always gets burned.
Periods of low volatility are ALWAYS followed by periods of high volatility (and vice versa). Right about the time you feel the most comfortable… well… that’s probably about the time where you have the most risk.
The talking heads in the financial media are suggesting there’s nothing to worry about. They’re relaxed… comfortable… And completely unprepared for any sort of downside action.
At this point, though, it may make more sense to cackle, flap our wings wildly, and scatter in all directions.
Otherwise, we might end up as coyote food.
Best regards and good trading,
P.S. It’s no secret that I see plenty of volatility ahead. And any long-term investor that doesn’t prepare for it will likely get burned.
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