When the market is so fearful, get greedy

It is Warren Buffett who stated that “Be fearful when others are greedy and greedy when others are fearful”.

Market has turned very fearful, with the VIX shot up into the 40s over the last weeks. It's all coming from the fear that the Greece crisis may turn into a global credit crisis, Lehman Style. Hedge funds are unwinding the pro-growth trade, a bet on growth oriented countries and companies, with the belief that the concerted efforts of central banks and governements are sufficient to turn things around.

The European sovereign crisis calls the thesis into question. Many have concluded that the economic growth is not going to be very robust. The New Normal thesis is back.

Flight to quality has driven up US long bonds, making it one of the best performing asset classes year-to-date.

The pullback this time is over 10%, more severe than the early February pullback. Yet, other than the European problem, the U.S. recovery is now on a firmer footing.

Perhaps it's time to get greedy.