Was the selloff wrong? Or did people just misinterpret the market?
No, I think that the macro people got too involved in the decision-making process, and rented too much space in our heads, versus those who follow individual companies.
In 2011, big American investors reacted to every word of the policymakers and every tick of the European bond market.
In 2012, it is a different set of cues. We are trading off individual stock and earnings reports. That's the case for several reasons.
First, once the Europeans took the Lehman risk off the table, Europe became a factor, not the factor, in our thinking.
Second, once the economy started to heal we didn't have to hang on every word from the Fed.
Third, while employment growth isn't that good in this country, we do not trade employment growth. We trade stocks.
That brings me to the fourth, and more important, issue: The macro people trade big indices; individual stocks are too small for them.
The stock pickers trade stocks, not indices. In 2011, when the macro people, the big swinging S&P 500 players, blew out their futures positions, stocks went down and stayed down, in part because the mechanisms of the market simply took hold and overwhelmed the performance of individual stocks.
In 2012, trading the S&P has not been a profitable game. Buying individual stocks has.
So the notion of the "market" being right or wrong has ceased to be relevant. What matters is which companies have growth, and that growth allows them to buck whatever gravitational pull the S&P futures might have. Given that the ultimate in horror, a Lehman default, was taken off the table, the S&P decline no longer causes such fear that individual stock pickers need to be sidelined.
It is all part of the virtuous circle of 2012, where the stocks of great growth enterprises shine. It is why I am doing my high-growth series. Growth is no longer ignored. In an era of slower growth worldwide, but not catastrophe, the companies that can grow faster than the world's economies thrive. In 2012, those stocks are right. And the market? It hasn't mattered. It lost the tug of war versus individual stocks, for which I say, hallelujah.
That's exactly how it used to be, before the great bear market of 2000 took hold. It's exactly how it is again.