As of the close Friday, July 18, the answer, as it pertains to the market, seems to be NO. This, I’m sure, is much to the chagrin of the media, in particular the folks at CNBC, who did all they could the previous afternoon to whip the news of the day into a panic. How do I know this? Despite the image that I spend all my time sitting in front of the tube waiting for these guys to say something misinformed, disingenuous or just plain stupid, I don’t. First of all, you would never have to spend all day to pick up on one of these pearls. Generally five minutes will suffice. What I do, whenever the market hits a volatile patch (up or down), is reference these guys for the possible reasons. In fact, most trading rooms have their flat screens on mute tuned to CNBC all day for the same reason: not to make ‘buy’ or ‘sell’ decisions, but to be aware of the more important bits of noise. After lunch Thursday, seeing the market had taken a turn for the worse, I checked in with CNBC and learned the news of the downing of Malaysia Airlines flight MH 17. Their reactions were pretty predictable. Everybody had on their “grave” face. Not that they should be cheerful, but the gravity was more about the potential negative implications for the market than the fate of the passengers and crew of this tragic flight.
OMG! What will the U.S. do?

OMG!
My read of the situation was that this was a tragic mistake, an unforeseen consequence of the rapid deployment of sophisticated, heavy weaponry into the ill-trained hands of the pro-Russian Separatists. It was not the beginning of a much wider conflict. On the positive side, if Mr. Putin or his inner-circle were rational, it might give them pause to think about their strategy of escalation. Meanwhile, geopolitical expert/reporter, Michelle Caruso-Cabrera, was trying to escalate the market alarm by fearfully asking, “What is the response going to be from the United States and Europe in a situation where we are already imposing sanctions (in fact, we had just announced new ones that morning) in an escalating effort on Russia?” Why, even Jim Cramer urged his flock not to “buy this drop.” Now I ask, based on what we know about the Obama administration’s reluctance to insert the U.S. into any more armed conflicts, “What would a rational person expect our response to be?” Send in the Marines? Interestingly, this news, plus the Israeli incursion into Gaza, could have been the spark to set off that much-needed, much-forecasted correction. At least at Friday’s close (7/17/14). It had not, as the market gained back most of Thursday’s losses.
Is this irrational exuberance?

I don’t think so. It probably is more evidence of the crazy trading fringe that sometimes rears its ugly head. Also, countering the idea that there is speculative froth in the market would be the abrupt flight to safety we saw Thursday afternoon. The 10-year U.S. Treasury rallied in price with the yield collapsing to 2.45% (a great day to lock on a refi). At the beginning of 2014 that yield stood a 3%. To me, this type of yield signifies a cautionary market, not the type of psyche you see at the top of a secular bull market.
A cautionary note
It is interesting that the unfolding Middle-East situation and MH 17 shoot-down garnered only a one-day response from the market…like ‘been there, done that.’ This would indicate continued pretty good confidence on the part of investors/ traders; and, alarmingly on a short-term basis, complacency. Complacent markets are vulnerable markets. On top of this, those who pay attention to valuation continue to sound warning alarms. We are two or three multiple points above long term averages. Maybe we have to go back to the mean. I don’t discount their arguments, but that meaningful correction may not come until we get to 5 or 6 PE multiple points (or more) above the average. None-the-less, you should be prepared for that sharp, ugly correction. It will happen and it will not be the end of the world. Are you nervous yet?
What is your perspective?
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Hi Bill, Your Posts are excellent and I have agreed nearly 100%. Larry said he thought I would appreciate your comments- and I do! George Meeker