With major averages hovering near multi-year highs, bullish sentiment is starting to creep up, according to the Association of Individual Investors and other polls. But sentiment remains far from exuberant and far less bullish than you might expect given the rally's staying power and resilience. (See: Full Steam Ahead: Stocks Damn a Week Full of Torpedoes)
One reason investors remain skeptical of the market is because they think the game is rigged, a view reinforced by the ongoing trial of hedge fund manager Raj Rajaratnam and revelations about apparent insider trading by former Berskshire Hathaway executive David Sokol. (See: Did Buffett Blow It? The Sokol Story Doesn't Add Up)
But it's "unrealistic" to think small investors are spooked by allegations of insider trading, says John Tamny, editor of RealClearMarkets.com and a senior economic adviser at H.C. Wainwright. "The are a good reasons to be skeptical [of the market] but to throw out insider trading as a reason is to avoid the real story."
And the real story is "there are a lot of good fundamental reasons…for why investors right now are scared of the stock market," Tamny says, including:
- America's "weak" dollar policy.
- Increased regulation.
- Uncertainty over taxes.
- Runaway government spending.
For these and related reasons, Tamny is "personally scared of the stock market," which puts him in good company with many of our viewers.
Where he differs from the majority is a belief investors (big and small) benefit from insider trading. "I don't see how small investors are not helped by experts in the marketplace finding quality information and bringing it to the marketplace," Tamny says.
Click here for more on this controversial viewpoint and let us know what you think.
- insider trading
- Raj Rajaratnam
- the Association
- the real story