In Finanical Markets Someone Will Always be Unhappy

I really liked this quote from Bob Farrell about how the current market environment is frustrating a lot of people (via Business Insider):

“Money managers are unhappy because 70% of them are lagging the S&P 500 and see the end of another quarter approaching. 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 the biggest double-play (a big currency move plus a big stock market move) in decades. The public is unhappy because they just plain missed out on the party after being scared into cash after the crash. 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.”

This makes sense of course from the most basic accounting perspective.  You see, all financial assets issued are held by someone.  If you sell your stock today then someone else is selling you their cash in exchange for your stock.  We all just swap assets on “exchanges”.  I call it a reallocation of savings.

The funny thing about this is that someone else might come along as soon as you’ve sold your stock and bid it up at a higher price.  In that case, you might feel a sense of opportunity cost as your cash remains the same value and your old stock holdings go up in value.  But don’t forget that there are LOTS of people who feel like this because there’s only so many financial assets of specific types for us all to compete for.  And so long as asset prices are rising, well, someone who doesn’t own those assets is always unhappy and feeling like they’re on the outside looking in.  And of course, someone else is always happy because the value of their asset is rising.  And vice versa for falling assets.  That’s just the reality of financial markets and the fact that all securities issued are always held by someone….Someone is always going to be unhappy….