Stock prices don’t move based on “fundamentals”.
Prices move based on positioning.
When investors are primarily on one side of a market, the pendulum swings to the other extreme.
One of my heroes John Roque said it best, “We’re not in a reversion TO the mean business, we’re in a reversion BEYOND the mean business”.
In other words, from extremes in positioning, the market doesn’t just go back to the average positioning. It tends to continue towards the other extreme.
This is the situation we currently find ourselves in as investors. [Read more…]