until the market rallies.

Everybody wants an “absolute returns” strategy until the market rallies.

Everybody wants to “focus on risk management” until the market rallies.

Everybody believes in asset class diversification until the market rallies.

Everybody wants to “be tactical” until the market rallies.

Everybody wants to “keep some powder dry” until the market rallies.

Everybody wants to be risk-averse and flexible until the market rallies.

Everybody prioritizes return OF capital rather than return ON capital until the market rallies.

Everybody “sticks with quality” until the market rallies.

Everybody is happy earning an appropriate rate of return regardless of the index benchmark until the market rallies.

And then, when it does rally, whether for 3 months or 2 years, everybody is revealed to be full of shit.

Everybody is unmasked and shown for what they truly are: Performance-chasing children who grow resentful at the thought of anyone’s portfolio outpacing theirs, no matter how much risk is being assumed.  Screaming chimpanzees rattling the bars of their cages when the colors and lights start flashing.

“I know I said I wanted to treat this capital responsibly and tune out the noise – but why the hell don’t I own those hot stocks that keep going up everyday?”

Portfolio stewardship is great but that’s not what you want when the market rallies.  What you want is to beat that goddamn index when it goes up.  What you want is an ego stroke, you want bragging rights and you want to be in the game, not watching it.  It’s only partially about the money, it’s more about being right.

Do you need a 25% return in any given year?  No but if the market rallies 25% you damn well better get it.  If you don’t, the despondency sets in – and then you’re going to do something really stupid.

And that’s exactly how trends are taken that last step too far.

It’s how a rally amidst horrible news can feed on itself and be utterly detached from reality.

It’s how market participants learn the power of panic buying, the pain of short squeezes, the capriciousness of rebalancing impact and institutional window-dressing.

Because everybody is calm and responsible and prudent and logical.

Until the market rallies.