Here’s a terrific sentiment read: the amount of money individuals have exposed to equities relative to their historical average. The chart below shows equity allocations by individual investors above and below their normal 21 year mean allocation to stocks (the 21-year mean allocation to stocks is typically 60 %).

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AAII Individual Investor Stock Allocations vs. 21-Yr. Mean

click for ginormous chart

Chart courtesy of FusionIQ

>

The present reading puts us 15 % under the 21-year historical mean. This reading is significant because it mirrors the readings seen at other major lows such as 1987, 1990 and 2002. Now while it doesn’t mean we bottom tomorrow (though we could) it does mean stocks are certainly in the 8th or 9th inning of the decline and not the 3rd or 4th (however as we know in baseball even the last few innings can get ugly sometimes before the game ends).

Liquidity plays a major role in the future direction of stocks because it gauges available — as well as future — buying power. When investor allocations to equities are very low this is bullish for stocks as it suggests investors (not cash) have moved to the sidelines in droves.

This does two things: Low equity allocations suggest investors have sold in droves, thus reducing much of the selling pressure from the market; Second, the low equity allocations suggests a large buildup in sideline cash (ie. new buying power) from many individuals.

Category: Investing, Markets, Psychology

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

70 Responses to “Individual Investor Stock Allocations”

  1. TDL says:

    And as we all know, a baseball game can go into extra innings.

    Regards,
    TDL

  2. Bob_in_MA says:

    How low did it go in the 1932 and 1982 bottoms?

    ~~~

    BR: They have only been around since 1978 — I don’t believe the survey was in existence in 82

  3. jason says:

    Of subject: Does anyone have a list of the best performing Japanese stocks or industries during the lost decade?

  4. bhupi says:

    How many people that got out of this mess are planning on staying out? I suspect a lot of people will not be throwing their money back into the stock market. When the country is ran by a bunch of crooks, and corporate america is ran by a bunch of crooks, why should people keep investing in equities? When you could of done better over the last 10 years in the bank over the S&P500 the bank looks pretty good.

  5. DavidB says:

    How are the boomers skewing this? Are any of them leaving permanently?

  6. de92 says:

    When the markets drop 40%, won’t that necessarily also reduce people’s exposure to it (self-fulfilling, or autocorrelation or something more statistical-word appropriate? I wish I was 100% more exposed as of today.

  7. Broken says:

    Currently 60% cash, 12% short SSO, 28% long.

  8. Oversold conditions are bound to result in rallies from time to time, but these should not be trusted at face value. For a more lasting market turnaround to happen, I would like to see evidence of base formations, a 90% up-day, and relative outperformance by the financial sector.

    I am also closely monitoring the surges in the US dollar and Japanese yen – low-yielding currencies previously used for funding risky investments – as a break of the uptrends in these two currencies will be a good indicator of the forced deleveraging selling starting to subside. Once this situation has played itself out, we should see a return to lower volatility levels and a return of confidence.

    http://www.investmentpostcards.com

  9. Becky says:

    I wonder if people sold to have money for living expenses. If so, that money will NOT be coming back into the market.

  10. bri says:

    saw a stat early this year, retail (the individual) was edging out of stocks in 05, 06, 07, while institutions were piling in.

    my last few years, i’m seeing the smart money is retail, outside the silos of WS/Greenwich.

    groupthink bubble in hedge/ prop world still all time high. see the porsche VW trade.

    i’m gonna go with the yahoo board this year.

    inning 5, whatever that means.

  11. BKM says:

    de92 is correct

    The chart doesn’t really tell us anything. If an investor was 60% stocks 40% bonds with
    the market drop of 45%….if he didn’t sell a single stock his allocation would now be 45%…
    which as the chart shows is -15% from the mean. SO maybe he sold and maybe he didn’t.

  12. daveNYC says:

    By this point, the boomers should have already shifted most of their investments into fixed income or cash type investments, though I’ve read enough articles concerning the boomers’ savings habits to suspect that many kept their money in equities in order to try and catch up their retirement savings to where they should have been.

  13. Two things I would add to this observation. Sideline cash has been building over the entire duration of the past year’s throttling. Should it finally enter the stock market, a melt-up something like what followed the post-9/11 sell-off could develop, leaving the fear-ridden in the dust. Then, however many months the market subsequently holds up, the worst could still be yet to come. The unwind of Structured Finance has a looooooooooooooooooooooooong way to go…

  14. gregh says:

    What sellers are left? Folks selling for tax purposes – right off the losses? End-o-yr hedge fund managers?

  15. BKM says:

    Also “cash on the sideline” is not an indicator in a vacuum. It is meaningless. Money Supply vs. Stock Supply is much more telling. A lot of money has been destroyed (deflation) and stocks reflect it. Aside
    from the money part is the psychological value placed on the stock. ie. at what price (agreement) will
    cash be exchanged for stock between 2 parties.

  16. Mind says:

    Take the example of someone approaching “retirement” – in their early 60′s – who has moved enough of their retirement savings into cash before/during this downturn to adequately fund their expected retirement needs (along with other retirement income sources – e.g., social security). That demographic will likely be conservative in moving back into equities in a major way. Then there is another group, in the same age range, that perhaps never recovered from their dot-com losses and/or are down 30% – 50% in the last year (there are many of these!) – they may be incentivized to jump back in aggressively because their only hope of a “reasonable” retirement income stream will be for their investments to outperform over the next few years. Will there be the opportunity in what looks like the current and future long recession for the outsized gains that were possible the last few years both on the long and short sides? If it’s really an L-shaped recession, people could be languishing with money-market-like returns for the long term – and that does not bode well for playing “catch-up” with their retirement income stream.

  17. jwilliams4200 says:

    What do you mean when you talk about money being on the sidelines? I thought that whenever someone sold a stock, someone else bought it. It seems to me that each stock transaction moves one person from cash to stock, and another person from stock to cash, for no net change. So what are you talking about?

  18. jrhyno says:

    @gregh

    “What sellers are left? Folks selling for tax purposes – right off the losses? End-o-yr hedge fund managers?”

    Perhaps Barry could help us out here. I think that hedge funds are still having to meet redemptions, and mutual funds may be selling as well. I’d like to think that a lot of stocks are too low for people to be selling, especially for tax losses. Can’t an individual only write off $3K per year? For someone w/$500K of losses on the books, they’d never get to use all of that benefit.

  19. dvdpenn says:

    Looking at the stock market through a forex lens, what Prieur du Plessis wrote is what I have been keeping an eye on.

  20. robrix says:

    jwilliams4200:

    I saw Mish hammer on your point as well, but I puzzled how folks with the perspective “whenever someone sold a stock, someone else bought it” do not understand that when investors move money out of the market (and into another asset such as cash, bonds, etc) this is a reduction in the demand for equities and results in lower prices.

    Econ 101: prices are impacted by supply and demand. Suggesting again and again that supply is fixed is fine. But what the chart above implies is that demand for equities has fallen and this is the basis for the fall in price.

    BKM and je92′s points are legitimate, but the fact that one could assume a relatively fixed amount of equities just strengthens the argument that this reallocation of assets by individual investors could be driving prices lower.

  21. rootless_cosmopolitan says:

    I agree with objections raised by others here regarding what these data are supposed to tell us.

    I have some more.

    1. How important are “individual investors” in the markets compared to institutional investors, anyway? To what degree are the markets driven by individual investors? Does anyone have any data?

    2. Assuming the decrease in the individual investor stock allocation hasn’t just been mainly the results from the reduction in the book value of stocks relative to other asset classes, where has the money come from that qualifies as new “buying power” in the markets of individual investors that hasn’t been there before? If all individual investors integrated have reduced their relative stock allocation by selling shares to institutional investors doesn’t this just mean the buying power in the markets of institutional investors has been reduced by the same amount? Thus, I don’t see that these data indicate any new liquidity that could drive the markets up.

    I would be interested in seeing what the data are during the decades before 1987. Perhaps, we only see a return to an exposure to stocks of individual investors that has been the long term average before the stock mania started.

    rc

  22. KJ Foehr says:

    Yes and it will stay 15% under for a long time.

    The market won’t improve until the fundamentals improve. And they REALLY stink now. Consider Roubini’s latest “The Deadly Dirty D-Words: “Deflation”, “Debt Deflation” and “Defaults”. And How Central Banks Will Have to Resort to “Crazy” Policies as We Have Reached Such Bermuda Triangle of a “Liquidity Trap””

    From all the evidence and the predictions of those who have been correct, such as Roubini and Schiff, the fundamentals are still deteriorating and will not improve significantly until maybe sometime in 2010! Hence, no need to rush into stocks anytime soon, IMO.

  23. wunsacon says:

    Hey, how about extra innings?? American balance sheets weren’t this bad at those past chart lows. It’s probably “different this time” because the facts are different.

  24. Winston Munn says:

    “….the low equity allocations suggests a large buildup in sideline cash (ie. new buying power) from many individuals.”

    This sounds a lot like the thinking at GM and Ford – low sales means an increase in potential buyers so let’s build more trucks and SUVs.

  25. Archiphage says:

    dvdpenn:
    Same here, and considering how hard it has been to stay long USD or JPY recently, we may be close to the end. Well, not *the* end, but at least an intermediate top. That said, I hope we see some further weakness in GBP for a couple of days!

  26. CNBC Sucks says:

    I was premature in my pronouncement yesterday. This crash still sucks. Basically, the stock market is trading as if it were 1974 – 85. YAWWWWWWWWN.

    Valuations are still relatively robust. Sure, trailing P/E on the S&P 500 is approaching 10, but P/Es based on 10-years earnings from 1974 through 1985 ranged from around 6ish to around 11. I know many Dennis Kneale types like to overpay for their stock, as they did for well over a decade, and the stock market will find any excuse to rally, http://cnbcsucks.wordpress.com/2008/06/25/the-stock-market-will-always-find-some-excuse-to-rally/. But can’t a man get a decent, honest, hardworking, reasonably priced stock market for a little while?

    Wake me up when the movie starts.

  27. dead hobo says:

    Goldman says 9% unemployment and a 5% negative GDP is coming soon.

    I guess the GS commodities people aren’t the only ones sending hype memos. A look over their shoulders would see them shorting everything in sight, I bet. This memo likely has the same validity as the $200 oil memo. Considering their stock is on the way to penny stock levels pretty soon, I don’t think they have the credibility they once had. And soon they will have even less.

    GS is the new contra indicator … It’s better than the cover indicator. They’re just trying to goose the last bit out of an overcharged market with a little fiction. They need to be exposed and ridiculed as fools.

  28. rootless_cosmopolitan says:

    robrix,

    I suspect the mistake in your thinking is that you imagine markets as a sort of bag that is filled with cash, when prices go up, or from which cash is drained, when prices go down. There isn’t any cash flowing “out off” or “into” the market of any asset class. The net cash doesn’t flow between different markets, it moves around between households (“household” in a very general meaning). Markets are interfaces between the households. Prices go up or down because the eagerness of buyers and sellers changes relative to each other. Thus, if Barry’s graph with the stock allocation shows anything it isn’t the buying “power” of individual investors. It rather shows the buying “willingness” for stocks instead, which is at a low point in the time range shown.

    rc

  29. leftback says:

    Load up your trucks with some goodies. Yesterday’s panic buying of Treasuries was a watershed of sorts.
    Just be careful what you toss in the flatbed there…

    I am looking at my purchases of TBT, GDX, PAAS, QQQQ and feeling pretty good today.
    Speaking of penny stocks, I bit on GMO and UEC. Alternative energy is not dead.
    Also bought some MTU, the Japanese will not let this fail and they know how to print.

    I hope GS becomes a penny stock as well…

    Happy expiration everyone.

  30. bdg123 says:

    Here’s a better data point. Institutional money is not anywhere near a bottom in their allocation models. It is the Wall Street money that’s stupid this time. If one uses such a metric, there is a LONG way to go before a bottom.

    ~~~

    BR: The Inst version we use is the Merrill Cash allocation of fund managers; Remind me Monday, I will see where that is.

    Since you are citing Inst money as not near a low, perhaps you might bother giving us a data point or link or something other than anecdotal.

  31. Vermont Trader says:

    Remember in July when the market was freaking over inflation.

    Now, four months later the market is worried about the exact opposite thing.

    Baby boomer retirement plans crashed in 3 months.

    Can we really turn all of our private household debt into govt debt without paying higher interest? Can we wrap ourselves in the govt’s AAA rating? Can we wrap our RMBS or CMBS or FNM agencies, auto company bailouts, social security, medicare, military?

    Stocks represent an alternative to fiat currencies. They are claims on the cash flow of companies. Many companies are in a lot better shape than the average consumer or the govt. There are risks but the right stocks do have value as part of any diversified long term portfolio…

  32. regular reader says:

    Barry, how about the following alternate explanation ?

    Lets assume everyone in the stock market is a buy and hold investor

    Mean stock allocation – 60 %
    Remaining portfolio is fixed income + cash = 40 %

    Stock market declines by 51% since peak would imply that the size of the portfolio has shrunk by ~ 30%, and stocks are now about 42% of the portfolio, which is 18% below the mean.

    Would not this explanation also fit consistently with the graph ?
    Cheers.

  33. Bob_in_MA says:

    “How many people that got out of this mess are planning on staying out?”

    Yeah, given people’s experience of the last 10 years (two huge market crashes), when this is over there will be a lot of people afraid of stocks (and debt) for good.

    When I was a kid 40+ years ago, guess how much money my parents (children of the Depression) had in the stock market? The idea of borrowing to buy anything other than a house was anathema. And a house was expected to cost about one times income. How many millions of kids already have the experience of foreclosure imprinted in their memory?

  34. leftback says:

    VT Trader said: “Stocks represent an alternative to fiat currencies. They are claims on the cash flow of companies. Many companies are in a lot better shape than the average consumer or the govt. There are risks but the right stocks do have value as part of any diversified long term portfolio”

    Right on bro’… the government’s AAA is about as meaningful as GE’s or Lehman’s…..

  35. jwilliams4200 says:

    robrix:

    “but I puzzled how folks with the perspective “whenever someone sold a stock, someone else bought it” do not understand that when investors move money out of the market (and into another asset such as cash, bonds, etc) this is a reduction in the demand for equities and results in lower prices.”

    This statement makes no sense. One could just as easily say, “when investors move money into the market (and out of another asset such as cash, bonds, etc) this is an increase in the demand for equities and results in higher prices”. This also makes no sense. But someone DID buy that stock that the other guy sold, and to buy the stock, he had to trade some other asset such as cash, bonds, etc for the stock, thus moving money into the stock market.

    The only thing that I can conclude from the recent drop in the stock market is that people seem to have adjusted their perceptions of the relative value (utility) of stocks versus cash — preference for cash increased relative to stocks. But I don’t see how a stock market trade can affect the total amount of cash outstanding, so I don’t see how it makes sense to talk about cash on the sidelines due to stock market trading.

  36. Dan Duncan says:

    Let’s see…Barry “runs a quant shop”…and points out a contrarian indicator, specifically asserting the significance of this indicator because the indicator means “(that) stocks are certainly in the 8th or 9th inning of the decline…”

    And what is the sample size of the indicator being touted as evidence by the quant shop that we are the bottom?

    FOUR

    I think I’ll wait for the Superbowl…Do stocks go up when NFC wins, or AFC?

  37. Dan Duncan says:

    Ah hell…I just looked at the chart again…and I noticed I made a mistake. The indicator that’s being used as evidence we are at the bottom isn’t relying on 4 such instances…

    It’s 3 instances.

    My bad.

  38. notsofastfriend says:

    There is no such thing as “Side Line Cash” (googgle John Hussman). Taking a 21 year average is usually a good measure. However, the last 20 years have seen an exponential growth in leverage making the stock market an attractive place to invest (that gig is up). Boomers are retiring, further draining the available pool of funds earmarked for equities. Folks are liquidating their portfolio to pay monthly expenses. I guess what I’m trying to get at is there is NO big pile of money ready to come back in, at least not enough to make a serious (long term) dent. For historical perspective think about how much your grandparents had in the stock market because that is where we are going… mine had none “too risky”.

  39. DL says:

    I think that there is some validity to this data as a contrary indicator. For those who have a four year time horizon, and don’t mind being underwater over the next year, buying stocks at this point would make sense.

    But the odds are that a better buying opportunity will come along over the next 12 months.
    (I myself am waiting for a good short sale opportunity).

  40. BKM says:

    I think peaple here get it…cash on the sidelines doesn’t mean much, except to CNBC of course. It is the perception of stock value between 2 parties. A good example of this is when a stock gaps up or down without a single share trading hands. Years ago I read a piece from Prechter that did a nice job of explaining this…of course his piece was more focused on the destruction of assets.

  41. rob says:

    I’ve been a bear for almost three years now, but some values are getting to a point that I’m awake at night because I haven’t gone long on them! I’m really chomping at the bit on some companies, but I’ll probably hesitate pulling the trigger on them and shooting myself in the foot. Yesterday, 20% cash, 80% short. Yesterday’s extended hours & today: 40% cash, 60% long, 0 % short.

  42. DP says:

    Damn look at GDX today, up 20%. AUY up 18%. I opened a small position in those a couple of days ago planning to average down into them. I wonder if this is “the beginning” or just a bounce. Don’t want to chase it here, but don’t want to start next year without a full position in these either, so I find myself in the odd situation of mostly long hoping for another crash at the close.

    Almost bought C this morning. Didn’t, but I couldn’t resist some of those $2 JAN 11 LEAPS (5 strike) as a small “all or nothing” gamble. Maybe I’ll do the same on DRYS and LVS. Reverse capitulation? It doesn’t matter anymore….

  43. KJ Foehr says:

    The recent wealth destruction crushes “cash on the sidelines”.

  44. rootless_cosmopolitan says:

    “Currently 60% cash, 12% short SSO, 28% long.”

    Full disclosure – great idea!

    Here is mine:

    Trading account: 400% stocks.

    Retirement account: 100% cash.

  45. VoiceFromTheWilderness says:

    I don’t think that we are in the final innings, rather it seems more likely that we are in the first few. I don’t say this because I have some special analytic ability or algorithms, in fact precisely the opposite. I say this because I’m looking beyond the numbers to the real world. There is a massive contraction under way, we all know this. And it’s only just started. I just saw an article about gambling in Macau, they are only just discovering that all those new hotels aren’t going to get filled, so… they are cutting. Dubai? Same deal. Do we really believe that the 50,000 citibank people are going to be able to make their mortgages next year? A more reasonable guess is that some percentage, probably bigger than 10 are going to have trouble doing that. We have a massive negative feedback loop forming. What is going to prevent it from doing so? Throwing money at banks? Doesn’t look like it. Maybe a new, correct stimulus of consumption? Wups… the US Gov is out of money, the interest payments they will have to make to pay for another trillion dollar bailout next year will put us into Argentina status.

    More substantively to your specific point: The problem with drawing conclusions from that chart is that it onlly covers the best period ever to be in US stocks. To be an even modestly helpful guide to what is coming it would have to cover… the worst period to be in US stocks. Unfortunately that may well be in front of us, not behind us. More generally the problem with using prior stock market data of any kind to predict future stock market behavior is that the prior data cannot include exogenous factors. I’m sorry, I know this is your business model Barry, but the truth is that staring at the tea leaves is no substitutute for looking up and noticing the invading mongols hoards (just ask the tibetans), or spotting that incoming tidal wave. Actaully, I think you do a great job of looking at the real world, so I don’t mean that in a critical way, just saying that drawing conclusions from charts from the 80′s, isn’t, in my view, likely to be a good predictor for what is coming.

    finally, as to ‘money on the sidelines is a stupid idea’. I’ve been reading Mish too about this, and thinking about it (uh oh!). I don’t yet understand exactly how his argument is flawed, but it is. Here’s why: By his logic the amount of money in the stock market never changes. But that is obviously absurd. The amount of money in the stock market obviously does change over time: there once was none, there now is some, and someday there will be none again. His argument says that can’t happen, therefore he is wrong.

  46. rootless_cosmopolitan says:

    VoiceFromTheWilderness,

    when you write,

    “The amount of money in the stock market obviously does change over time: there once was none, there now is some, and someday there will be none again.”

    What does this mean? What does “money in the stock market” mean? Where is the money when it is “in the stock market”?

    I think, your statement is just totally meaningless. There is no money “in the stock market”. Thus, the question, why the “money in the stock market” never changes is equally meaningless. Individuals/institutions own things. Goods. Money. They exchange things. Goods for goods. Goods for money. When many do it regularly it’s called a “market.” The market is the interface between the individuals/institutions, but it isn’t a money container.

    rc

  47. bonghiteric says:

    Scaled into WY and PCL today at the open. I set limits buys around the Oct intraday lows a week or so ago and they were triggered. This isn’t for a trade but beginning to accumulate for LT.

  48. rootless_cosmopolitan says:

    KJ Foehr,

    “The recent wealth destruction crushes “cash on the sidelines”.”

    Destruction of fictitious wealth, though. Painful nevertheless. The destruction of illusions/delusions is often painful.

    rc

  49. Stevie b. says:

    I really hate and hesitate to say it, but…er…um…this time it really is different. I’ve been around the markets for half a century. I’m skilled in very little, but I have read an awful lot of research in my life and I’m practised in trying to separate empty words from reasoned, original thought. The problem with history is that it doesn’t repeat itself in anything other than a simplistic manner – usually it’s just a placebo and a convenient excuse for a lack of deeper thought. Charts that show extremes such as this one are really attractive superficially, but any objective analysis of the situation could well lead us to believe that a Black Swan event is unfolding before us – and then history is bunk.

  50. jrhyno says:

    Up or down into the close?

  51. DL says:

    If you want to believe Peter Schiff, the U.S. economy and the stock market are going to be in deep shit for years to come.

  52. babycondor says:

    rootless says: “Destruction of fictitious wealth, though.”

    Kind of makes you wonder what real wealth is, huh?

    Maybe that’s the ultimate purpose (if you believe in a purposeful cosmos) of this whole little “Black Swan Event.”

  53. Mannwich says:

    I was kind of looking for a big rally today. Now I think we’ll get a big selloff in the final hour into the close. Who wants to be long going into the weekend at this point? I’m now mostly long but am regretting it somewhat already.

    Thankfully my big GDX holding is kicking some major butt today. Took some off the table today already but still retain a big holding.

  54. emmanuel117 says:

    Here come the hedge funds…

  55. Mannwich says:

    Maybe I was wrong about a big selloff here (I hope so). Long way to go into the close though.

  56. mddwave says:

    “Second, the low equity allocations suggests a large buildup in sideline cash (ie. new buying power) from many individuals”

    It seems that there is a “large buildup in sideline cash”.

    Look at the yield curve!
    http://stockcharts.com/charts/yieldcurve.html

    You can get a 3 month treasury with an interest rate of 0.01%!
    http://stockcharts.com/h-sc/ui?s=$UST3M&p=D&b=5&g=0&id=0

    Not much of a better rate than putting the “sideline cash” under a mattress, but better than everything else?

  57. jrhyno says:

    Buy Buy Buy!! What, everyone’s buying??

    Sell, Sell, Sell!! (Reprised from an episode of the Flintstones….)

  58. Scott F says:

    This was an awesome contrarian call –

    Thats why I love this site — we were down 80 when this post went up, and now we are up 400

    You rock!

  59. I-Man says:

    Oh Jah…

    I wonder how much money in what were ITM puts just went flying out the window??? I cant believe we just blew past 800 on SPX!

  60. BKM says:

    A lot of the traders that I know are nibbling in these areas, just as they were prior to the triple bottom failure and stopped out. Something to consider, the triple bottom setup of the last several weeks is about one of the nicest (long) as you will see(For Many Reasons). When we knifed through the 770 I got the sense that the market is more wounded than most have observed. As an experienced trader I have many times been a buyer when fear was prevelant. I remember sitting in front of my quotron screen during the 87 crash like it was yesterday. It was scary as hell, but it was also one of the most exciting days of my life, it was a great day $$$$. That night I proposed to my wife of 20 yrs.
    This time IS different in many ways structurally(anybody remember market markers not answering their phones..bastards) and psychologically. Sure there is fear and some panic, but it is mostly dread. Even the oldtimers are watching this unfold with a sense of disbelief. A “dread market” is what we have and I have not experienced it before. I think in this type of market you have to rely on the action first and the other tools secondary. hmmm I just had a long trigger..damn meant to pull that. so I am long 774 bet I get stopped. see what happens
    The point is.. peaple try to anchor their opinions to a data point, stat or whatever and a lot of times with proper money management it works. But this is a dread market with alot of shiney brand new moving parts, nothing can be trusted just the action . I just closed that trade WOW I left alot of meat on that bone. btw.. that reversal came at 40% off the 200ma. I know several peaple that were lookin for that, good for them.
    Nice close today, I doubt its a tradable low until C gets resolved.

  61. I-Man says:

    BKM:

    “Dread Market”… Ya mon.

    I like the sound of that. If I-Man ever starts a blog… it might have to be called that.

  62. bdg123 says:

    I was out most of the day but re your remark, three data points. 1. A late October/early November WSJ survey by either CS or UBS that showed 86% of all S&P 500 pension managers were at least 50% exposed to equities. 70% were at least 60% exposed. I wrote down the stats because I was going to post it on my blog but never finished the post. But, I need to dig up the article if you want the specifics. That’s insane asset allocation by professionals. Two, I have a good friend who runs a substantial amount of money for a primary dealer. He told me last week that all of the professionals in his organization were 60%+ allocated to equity. And, third, the Richard Bernstein quoted MLIM?? survey was still at 55% a few months ago. There is no way it has dropped any appreciable amount. I haven’t looked but I don’t need to because institutional money because more bullish in October so that number surely hasn’t changed.

    Wall Street is holding the bag. And, that is relatively unusual. They usually like to dish their garbage to everyone else. But, this time they weren’t able to. That’s why Wall Street is never going to be the same.

  63. harold hecuba says:

    what absolute rubbish. is this more data mining to justify that stocks are somehow grossly undervalued. aaii is worthless i read it simply to see what conventional wisdom is thinking. some great calls from the past few months were to PILE into the euro at 160 and pile into the swiss franc at obscene levels. conventional wisdom was calling for the dollar to collpase and a rise in equities due to falling oile prices. i had the opposite side in each of these situations particularly the dollar. in addtional what moronic time frames to choose this garbage. 1980′s to 2005-2006 were fuled by the greenspan and bernanke lunacy. the wall street model is more than comical. stocks are not savings but highly risky investment. earnings over the past few years were credit and debt enduced rendering them borderline useless. wall street is nothing but a gigantic sales machine that is wrong every point of the way. they should be given zero credence in any situation. quite frankly i can’t stop laughing, the wall street allocation model good god my sides are cramping and i am tearing from laughing so hard.

  64. harold hecuba says:

    i’m absolutely disgusted at the rubbish that is circulated to the public. this crap is a fine example of uselessness and is why the dumb lobotomized retail gets itself into these predicaments. this latest crap from aaii should be completely ignored. some of the most prestigious hedge fund guys i know are updating their models to this unprecedented period. models that are created out of 30-40 years of data are obsolete in this environment yet aaii chooses to point out the period of greatest lunacy in the histopry of financial markets. what scum of the earth

  65. harold hecuba says:

    good lord!!! i’m sorry the data is even WORSE than i thought. it only goes back to 1987. PLEASE IGNORE THIS RUBBISH

  66. VoiceFromTheWilderness says:

    if there’s no money in the stock market then there’s no money on the sidelines either and the whole issue is a word game. Actually, I’m fairly sure the whole thing is a word game designed to puzzle, and effective in countering arguments one doesn’t like. That would explain why Mish pumps it endlessly. What do you believe your bank account has actual cash in it? Maybe all the ‘money you have in your house’ is upstairs in the attic. Better go check. Oh, you’ve decided that euphemisms don’t mean anything because the overt content doesn’t match the actual meaning? Like I said, word game for time wasters.

  67. jakester says:

    now that the majority of nervous shorts covered today, we will see lower lows next week.

    “the well informed will always stay well positioned”

  68. leftback says:

    jakester – i doubt if many shorts covered. they may become more nervous next week, as I suspect we are about to see a new round of intervention, this time from our new administration. Some kind of cash injection/rescue packages for F, GM and C would really stick it to the shorts. Uptick rule? Maybe.

    Lots and lots of money in SKF, I would hate to see people lose all their hard earned cash. In addition there is absolutely tons of money in the long bonds and all the panic birds who flew in there on Thursday are already underwater after today. A bit more selling and that yield is really going to blow out. This kind of set-up is what classic squeezes are made of.

  69. ben22 says:

    leftback -

    I’m building in TLT, bought a lot on Thursday. I was early on DUG but that worked our real well, this will probably be the same.

  70. netsmith says:

    I wonder if this might not be a good moment for a change in policy relative to Social Security. After all the hoopla during 2005-6, with the attempt to sabotage the system, there was a lot of skepticism about all aspects of the proposed changes. (The sabotage was in trying to get the benefits based on CPI vs. Wages.) The whole question of investing in equities got lost in the (rightful) outrage over the proposal to carve out the investments into personal accounts.

    But there is something to be said for having the system itself invest in equities. If ever there was a time to do it, it’s now (or soon will be). There are lots of ramifications, but it does seem like the government is investing in all sorts of depressed “assets” in order to shore up their price. Diverting the payroll tax surplus to this purpose could help now, mostly by increasing the supply of Treasury bonds (needed to fund the general account deficits).