Be clear on this, we are in a classic Warren Buffett investor moment. Are you fearful or greedy? Are you with the pack or are you a contrarian?

It’s D-Day

The big ‘Wazza’ once explained: “When everyone is greedy, I am fearful, but when everyone is fearful, I am greedy.” It’s something to ponder with D-Day – that is, Draghi Day – arriving.

Sometime today, the eternal stock market battle between greed and fear will take a turn for the best, the worst or maybe somewhere in between. Whichever way it goes, I bet it will be a big reaction.

A recent CNBC report argued US investors have dialed down risk despite the fact “the market has doubled in value since March 2009, [and] is trading at four-year highs.” Even this year, the US market is up close to 12%, but there’s still no buyer enthusiasm on an historical basis.

But is this about to change?

The trigger will be what the European Central Bank boss, Mario Draghi, says tonight. It’s bound to make or break this market, though there could be a muted responses if he delivers the minimum expected by pundits.

Against that, the Europeans have been chronic under-deliverers, meaning anything that looks like they have actually confronted the brutal truth and responded ‘manfully’ to the problems ahead (if I’m allowed to say that sort of thing nowadays), then the market could easily take-off with unbridled enthusiasm.

A positive scenario

Let me put forward the most positive scenario possible to explain how we could see a big market take-off. I shared this with my readers today in my daily blog on www.switzer.com.au website, but it bears repeating here as this could prove to be a historically significant day.

To put the significance of Draghi’s revelations into context, it looks like this:

• First he deals with the high borrowing costs of countries such as Italy and Spain.
• Next he adds to liquidity and brings interest rates down for banks, businesses and consumers.
• This in turn should not only pump up confidence, but help investment as well as consumption.
• Next EU growth rates should respond.
• This would help growth, confidence and investment in China and the USA.
• This in turn would set the scene for stocks to go higher and, of course, it would help commodity prices and our stock market as well, pushing the dollar higher.

A new trend?

As I argued last week, the brave would buy miners today, but they would be speculators who could easily flip a nice profit. But if the Europeans do come good tonight, then a new trend for mining stocks could emerge based on the expectation that China would benefit from a faster growing Europe, which of course would need about six months before this showed up in official growth figures.

However, the stock market doesn’t wait for the future to show up – it runs ahead of reality and a new fast-forward reality is bound to emerge after the Draghi delivery.

Of course, there will be experts who will want to focus on the upcoming ruling from the German Court next week on whether the EU bailout fund is constitutionally sound for German money, but there will always be prophets of minor doom out there.

The Draghi revelations today are the main game – it has been that way since he promised “whatever it takes” – and today is delivery day.

I really hope these EU politicians throw off their no-hoper tag today. We really need them to – big time!

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. Anyone should consider the appropriateness of the information in regards to their circumstances.