The infamous “E*Trade baby” debuted during the January 2008 Super Bowl.
At the time, the S&P 500 was an un-alarming 10% off its peak… but it was about to slide another 42% lower over the following 13 months.
E*Trade’s message was bold: Making money in stocks is so easy, even a baby could do it.
It was marketing genius – but, obviously, terrible investment advice.
Now, almost a decade later, E*Trade’s got a new “kid” in town.
I saw the discount broker’s latest ad on the flight home from our quarterly meeting in Baltimore. I didn’t even realize it was an E*Trade ad until the end. I was listening to music and scanning stock charts when the seatback screen in front of me caught my eye.
This young, geeky-looking kid was running around the deck of a mega-yacht like he owned it… dancing up a storm through a flock of bikini-clad beauties and, eventually, jumping off the side of the ship with wild abandon.
It looked like he was having the time of his life!
Finally, the punchline text appeared: “The dumbest guy in high school just got a boat.”
And then the close: “Don’t get mad. Get E*Trade.”
You’ve likely heard that the prevailing sentiment at the tail end of bull markets is greed.
I think it’s worse than that…
I think it’s more like envy.
When the masses get greedy, you’re close to the top.
But when the previously conservative and “prudent” investors become envious of all the foolish pigs making money… that’s when you’re really close to the top!
That’s what happened to Sir Isaac Newton in the South Sea bubble. He made money in the bull market but sold “early” out of prudence.
Then he watched a bunch of his less-educated peers make even more money after he had sold. He got envious… he got back in… and then he got crushed when it all came crashing down.
If we think E*Trade’s current marketing message is a reflection of the prevailing sentiment, we may very well be in this final “envy” stage of the second-longest bull market in history.
At the very least, we’re sure as anything in the “greed” stage.
But think about what E*Trade’s ad is really saying…
“Don’t get mad. Get E*Trade”
It sounds like they’re targeting conservative investors who are envious of the brave ones who are, indeed, making money in today’s market.
Of course, this should make us think of the popular Wall Street warning about market tops – the idea that once your cab driver tells you he’s making “easy money” trading stocks… the end is near and you should run for cover!
So, Is the End Near?
Frankly, I have no idea!
E*Trade’s “dumbest guy” may very well end up signaling the top, just like its “baby” did in January 2008.
Or maybe not… maybe this bull market goes on another couple months… even another couple years.
Again, I have no idea precisely when, or how, this all ends.
But I do know one thing…
My time-tested investment models will be ready for when it does.
You see, the beauty in systematic investment strategies – particularly ones that go “long” and “short” – is that you don’t need to predict when the “top” will come.
And that gives you a huge advantage over other investors, who will either not make any money on the way up (because they’re too “prudent,” or scared)… or lose it all on the way down (because they don’t have an exit plan, let alone a way to play the downside).
Unlike “buy-and-hold” investors, who can only play offense, and “value” investors, who are out of this “overvalued” market… we can make big money on the way up and on the way down.
We can be “greedy” while the getting’s good, making everyone else green with envy.
And then, when everything finally begins to unravel, my models are designed to switch into defensive markets, and even make big profits on the downside.
Bottom line: You’ve got to have a system to survive in this boom-and-bust market.
Once you do, I’m confident you’ll stop guessing and worrying about the next impending “top.”
E*Trade’s “dumbest guy bought a boat” commercial – and common sense – tells us the top may be close.
Whether it is or it isn’t… I have proven market-timing models that will adapt, finding profits on both sides of the market.
Editor, Project V
Follow me on Twitter @InvestWithAdam