I’ll tip my hat to the new constitution
Take a bow for the new revolution
Smile and grin at the change all around me
Pick up my guitar and play
Just like yesterday
And I’ll get on my knees and pray
We don’t get fooled again
Don’t get fooled again — The Who

I’ve talked to you guys a lot about my “Who’s more scared?” indicator. Over the past decade, I’ve noticed that when the “Who’s more scared, the bulls or the bears?” question has an overly obvious answer, the market is usually about to make a turn of some sort. That is, when the bears are clearly more scared, the market is usually about to pullback, at least temporarily. That usually happens when the markets have been in steady rally mode. And when the bulls are clearly more scared (usually after a big pullback and lots of ugly selling), that can be a big indication that the markets are about to pop.

There’s an old saying that I learned when I first got to Wall Street in a book that I’d sat reading for free in Strand Bookstore in 1996 that goes, “Mr. Market will make a fool out of the most people the most amount of time it can.”

So here’s today’s thought of the day as I sit here in the ABQ airport on my way to LA for the Apple Investor Summit — do you know any bulls who are actually scared right now? Do you know any bears who are confident?

Go back and look at all the times during this big market rally over the last few months that I’ve pointed out that I didn’t think there was a clear answer to my “Who’s more scared?” question. I repeatedly noted that even though the markets were rallying steadily and that even though we’d expect the bears to have been scared and the bulls cocky, I didn’t see that dynamic out there, and it helped keep us steadily net long with lots of upside exposure that has obviously paid off big during that run.

With that huge pop into the close yesterday and the steady melt-up in so many stocks and with the broader markets continuing to motor through multi-year new highs, and with me headed to a conference all about Investing In Apple — well, it sure seems like there’s a lot of people that the market could get around to fooling right now, huh?

Think about the launching of this Apple Investor Summit after all — talk about a potential contrarian top indicator…it could end up being like Rupert launching a TV business network two weeks before the markets topped in 2007 and we headed into a crash or, say, it could be like Forbes launching its Billionaire List magazine two weeks before the markets crashed on Black Monday in 1987. Like I said, Mr. Market likes to make people look foolish.

Be careful out there, don’t chase these stocks blindly. And remember that everything you do in your portfolio should be geared towards maximizing your returns and minimizing your risks over the next 3000 days, not the next 3 days.

All that said, I mentioned adding LVLT (rated an 8/10 to start) as a long and MBIA (also rated an 8/10 to start) as a short yesterday. I’m going to just start by buying a few shares of LVLT common and seeing if I can locate some MBIA shares to borrow to short sell. Short-selling a stock means I actually borrow the shares from somebody and then I go out and sell them and hope that I can come back later and buy them cheaper to replace the shares I borrowed.

I’ve got a packed schedule today (lunch with my old best friend NPH of Hollywood fame, dinner with an old friend from CAA, and court side seats to the Clippers later!), and as I am now being called to board my plane, posting today might be sparse.

The Who – Won’t Get Fooled Again