The Underground Trader: The Ultimate Contrarian Signal?

We have been speaking for the last week or so about the theme of the "departure" of the retail investor from the market, contributing to overall light market volume, poor performance of brokerage and exchange stocks, and massive withdrawals from mutual funds. The "smart money" supposedly believes in the "Dumb Money Theory", which states that the retail investor always gets market timing wrong, giving a huge buy signal. I am not sure if that is true in this case, as there has surely not been any sign of "capitulation" and the S&P is in fact coming back close to the open of the year. But an important axiom of the "Dumb Money Theory" is that the general news media must start prominently featuring articles on the "death of the retail investor", and that is just what happened today.

USA Today's Money section ran as its lead story, an article titled "Could investors fleeing stocks become a lost generation?"

"The fear on Wall Street is that this buyer's strike will linger for years, resulting in a lost generation of investors similar to what occurred after steep stock declines in the 1930s during the Great Depression and early 1970s, a recessionary time punctuated by high inflation." The article cites many reasons for the investor malaise (which we all know by heart by now): 1) two major crashes in a ten-year period 2) lack of returns, with the Dow flirting with a 10,000 level first breached in 1999 3) the employment and housing situation 4) the feeling the market is "rigged' and lacks effective regulation and 5) the individuals with the most investable assets are those in or close to retirement. I am about all talked and read out on this topic, with nothing more to add; all I know is above 1100 we're good, below 1000 we're bad and everything in between is just a trading opportunity.