Too Many Traders Expect a Pullback

The biggest question on everyone's mind this morning is: Why won't this market pull back? I suppose that question underscores the answer: Too many traders are expecting it.

How can volatility continue to fall? For months, the VIX has been bouncing around at all-time lows. And the trend to get there has been as steady as can be. I guess you could say this boom and this rally phase have been so steady that even the volatility of the VIX is at all-time lows. Call it the second derivative of volatility. Quick, someone go create an ETF for that.

Speaking of which, the ETF explosion is likely to continue. In much the same way as the Internet has leveled the playing field for individual investors by facilitating information flow in ever more ways, technology has created the ability to trade essentially commission-free. Why wouldn't brokers continue to create sector/strategy/etc. ETFs when the cost of doing so is next to nothing and the instruments are, frankly, often better than actively managed sector/strategy funds?

As James Altucher has repeatedly said, the ability to charge for managing money is fading. Two and 20 for a hedge-fund manager? That fee structure will become an increasingly difficult pitch.

The good news is that as the brokers, money managers and everyone else continue to lose their pricing power, less capital is being siphoned off from the virtuous cycles that capital flow creates. Enabling more virtuousness creates economic value and wealth for the system. And because we're all part of the system, we all benefit, at least from a broad sense.

Think of it this way. Weren't E*Trade (ET - commentary - Cramer's Take) and the online discount brokers supposed to kill the old-school brokers like Goldman (GS - commentary - Cramer's Take) and Morgan Stanley (MS - commentary - Cramer's Take)? A decade after that online-broker revolution was started, Goldman and Morgan are issuing tens of billions of dollars in annual bonuses. And their stocks are near all-time highs, of course. Rather a nice "flip it" in there, no?

I haven't traded yet today, and that's OK by me.

At the time of publication, the firm in which Willard is a partner had no positions in any of the stocks mentioned, although positions can change at any time and without notice.

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Cody Willard is the manager of CL Willard Capital Management, LLC. He is a regular guest on Fox News, CNBC and other networks, and he writes a monthly column for the Financial Times. He is also an adjunct professor at Seton Hall University and the author of TheCodyReport.net, a monthly stock market newsletter. Willard appreciates your feedback -- click here to send him an email.