Kass: Frustrating the Majority

NEW YORK (Real Money) --

Money managers are unhappy because 70% of them are lagging the S&P 500. Economists are unhappy because they do not know what to believe: this month's forecast of a strong economy or last month's forecast of a weak economy. Technicians are unhappy because the market refuses to correct and gets more and more extended. Foreigners are unhappy because due to their underinvested status in the U.S., they have missed a big double play: a big currency move plus a big stock market move. The public is unhappy because they just plain missed out on the party after being scared into cash. It almost seems ungrateful for so many to be unhappy about a market that has done so well. Unhappy people would prefer the market to correct to allow them to buy and feel happy, which is just the reason for a further rise? Frustrating the majority is the market's primary goal.

-- Bob Farrell, September 1989

Bob Farrell is a legendary figure on Wall Street. I have quoted him on numerous occasions over the past decade. Bob ran Merrill Lynch's technical research effort for many decades, and, as he always tells me, market history rhymes.

The quotation above (from a report he wrote in September 1989) has some worthy pearls of wisdom that still ring true today.

June's boohoo rally is starting to look like the boohoo rally in the beginning of 2012.

Even a large drop in German sentiment (reported early this morning) has failed to dent market enthusiasm around the world this morning.

As I wrote in yesterday's opening missive, I am maintaining a contrarian view that the delicious dozen might be the source of an explosive move to the upside in 2012.

Importantly, many classes of investors could be positioned offside if the market continues to rally, as they have de-risked, which is not surprising in the face of a growing sovereign debt crisis and weakening domestic economic news.