Click to enlarge:



In support of the argument that much of Wall Street is underinvested, consider the chart above. (We showed this last month as well). It not only asset managers, but analysts as well who are not all that enamored with equities.

As I have been asserting since 2009, this is the most hated rally in wall street history.  It appears that lack of enthusiasm continues to be a source of fresh energy.




BofA/ Merrill Lynch
Sell Side Indicator
September 04, 2012

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.

32 Responses to “Sell Side Indicator”

  1. Everyone is focusing on the tail risk of Europe, fiscal cliff, or the scare de jour. What they forget is that tail risk events are low frequency events.

  2. algotr8der says:

    Great – toss out all fundamentals and grab risk assets because the Fed, the ECB and the BOJ have our backs. This is going to end with a lot of people losing a lot of money. When you steer from fundamentals you might as well make decisions with your eyes closed.

  3. Frwip says:


    Do you know if the series data is publicly available ? I’d love to plot that against a few indicators.

  4. [...] Sell-side strategists still hate stocks.  (Big Picture) [...]

  5. Pantmaker says:

    For years people relied on the equity in their homes for cash…now they rely on their cash for their cash. What a concept. The exodus out of equities to the promised land of cash is just getting started. I think a case could be made that the new buy and hold for the next 5 to 10 years could be some well placed index shorts.

  6. dead hobo says:

    BR opined:

    As I have been asserting since 2009, this is the most hated rally in wall street history. It appears that lack of enthusiasm continues to be a source of fresh energy.

    I would think that markets would plow upwards unstoppably if they didn’t seem so manipulated by central bankers, algos, and asset managers and if liquidity wasn’t the prime driver, as opposed to earnings.

    Your motivations as an asset manager have little relationship to my motivations as someone with assets at risk. Asset managers get paid regardless of ups or downs. Investors only get paid if assets increase in value. All you have at risk is a smaller payday. All I have at risk is outliving my money. That ‘hated rally’ hype is rather insulting.

  7. [...] notes Barry Ritholz.  Nothing like a good contrarian indicator to start [...]

  8. krice2001 says:

    @ dead hobo
    While your point is valid concerning your perspective/motivation as an individual investor vs. Barry’s position as an “asset manager”, it sure feels to me like part of your frustration is being on the wrong side of this trade… so far.

  9. dead hobo says:

    krice2001 Says:
    September 7th, 2012 at 1:12 pm

    @ dead hobo
    While your point is valid concerning your perspective/motivation as an individual investor vs. Barry’s position as an “asset manager”, it sure feels to me like part of your frustration is being on the wrong side of this trade… so far.

    Not really. My frustration is not having many recognizable signposts. I just bailed from a long term bond trade that was betting on a flight to safety. I got out well, but Draghi’s press conference made me think he was little more than a traditional Italian central banker who just got hold of a printing press that has unlimited ability to print and that he’s not afraid to use it while lying about all his plans. The euro is turning into the lira. Spain will get lots of free cash and I suspect Greece will be bailed out once again after listening his press conference. He just killed operation twist and any plan the Fed has to lower rates any further.

    Earnings can’t be good if unemployment is so bad. Markets should be reacting but, no. Algos and central planners are pushing it higher. I trust the economy and my judgement concerning it. I don’t trust wall street hype.

  10. nofoulsontheplayground says:

    I’m curious as to whether the bull/bear stats play out any different in secular bear markets.

    While we have stats from the 1982-2000 secular bull market, it would be nice if we saw some sentiment numbers from 1966-1982 to bring some perspective to the current situation, a cyclical bull within a secular bear market.

  11. Tamu82 says:

    Another reason NOT to try and call a top and short this market . . . GREAT chart, BR!

  12. algotr8der says:

    Why pay 2 and 20% when all you could have done was blindly go long the S&P because fundamentals don’t matter anymore when you have the printers printing away.

  13. cmellen says:

    If I am not mistaken, there are only 9-12 strategists that go into this model. It is simply not a big enough group to have any real meaning for the markets. There is all this talk about hated the rally is now, while sentiment numbers are far different than what people are saying. As you said the most hated rally was 2009 and this may merely be an extension of that.

  14. Good and timely chart BR!

    Such absolute bearishness and lack of interest in the stock market seem to confirm why under Dow Theory the stock market is since June 4, 2012 (signal issued on June 29) undergoing a primary bull movement.

    By definition markets should tease the greatest number of investors and have them on the wrong side. If it was easy to identify a trend, and more importantly, stick to it, most investors would be successful. But there aren’t. The markets are always a teaser when lived in “real time” and not through the perusing of old charts.

    So this post confirms why it is so difficult to make money in the markets.

    Since the bull market started on June 4, the S&P has gained 12.4%.

    And since the Dow Theory “detected” the primary trend and told us to jump aboard on June 29, the S&P has gained 5.8%.

    Here you can find why I believe we are in a primary bull market and why technically the bull is in good health.

  15. AHodge says:

    i think there is a difference between temporarily hated and permanently hated
    there is some permanent this game is rigged this isnt investment
    its some nightmare third world shell gamelike latin america in the 70s market
    i think you have, righteously, contributed to this, by just saying its so,

    i just hung out in maine with some buyside guys, and sometimes its hard to talk to even the most reasonable of them
    they still have to have a reassuring story for “investors”
    the ultimate buyside is us the investor
    all the fund managers are passthoughs and have to get our money
    some folks like pensions and life insurance excepted

    nothing like a big long legs rally, a genuine real activity boom,, and a sense the market is fair
    to make investors forget all their worries-im less convinced this is in our near future

    but we do
    have a likely prospect of long term GDP and asset growth of 5% per year

  16. AHodge says:

    as for your B of A sourse for this chart you can guess what i think of that

  17. AHodge says:

    this could be a bunch of sellside crybabies seeing their gravy train go away
    id be depressed if i worked in that sector
    i hope we can drive that fucker to 20 and make them really depressed
    hard to see them massiely more depressed than say nov 2008 unless this poll if more about their own icome and job security

  18. dead hobo says:

    Off top it a little, but Germany = sucker. Indirectly, Germany will be subsidizing a lot from now on, thanks to the Italian banker at the ECB. The Fed is a minor player now. What a bunch of stooges.

  19. DrungoHazewood says:

    Talk to some cash holders that are in “wait and see” mode. I didn’t even bother telling them that by the time they see…………………

  20. slowkarma says:

    BR said: “As I have been asserting since 2009, this is the most hated rally in wall street history. It appears that lack of enthusiasm continues to be a source of fresh energy.”

    There’s a good reason for that. People who are investing (I don’t know about traders) tend to look at the financial environment for clues about what to do. Right now, things are difficult all over, in the US, Europe, China, all the main drivers of the world economy. Normally, in this situation, an investor might be reasonably inclined to great caution. The problem is, we have central bankers who can turn the stock market (but not the overall market) with a single decision, and sometimes, that decision comes down to a single man. If Bernacke gets up feeling good about himself and his theories, he pushes for another QE and the market is up three per cent. If he gets up feeling low, and that his theories are useless, he votes against the QE and the markets drop. But how can anybody know what he’s going to feel like in the morning? Maybe even Bernacke doesn’t know. It feels like we’ve lost an anchor in reality, that the markets now respond to the media and to the decisions of one man or a very, very small group of men, rather than to anything fundamental. Has there ever been another time when this was so true?

  21. 4whatitsworth says:

    Interesting chart I generally like the idea of buying when others are selling. This time however I am in the “I hate this rally” camp the rally makes absolutely no sense to me. In 30% cash for now if it goes up again then maybe sell some more.

  22. Orange14 says:

    Does anyone (besides me ;-) ) do any fundamental analysis these days? Even with the crappy employment figures there are still people out buying stuff and industries hiring people. PE ratios and cash flows are decent or better than decent for a lot of companies and earnings while not supercharged are pretty darn good all things considered. Now folks can sit on the sidelines and bemoan a rally that shouldn’t be taking place or they can figure out what is happening with individual sectors and put some money in equities.

  23. mad97123 says:

    The Sell Side Indicator looks like it fell of a cliff in January 2012, yet margin debt, an indicator or risk appetite, is higher now than it was in January.

    Like wise, fund manager cash ratios are near lows. Hard to tell who is under invested here.

  24. Disinfectant says:

    Two big problems with what this chart appears to be saying.

    1. It is ludicrous to believe that analysts are more bearish now than they were from September 08-March 09. How could that possibly wring true to anyone?

    2. How much real money is being invested according to these recommendations? I can’t imagine very much. A survey of actual NAAIM money managers shows that they are actually very bullishly positioned right now. They were only moderately bearish at the June 1 low, not nearly bearish enough to accept as a durable bottom. See NAAIM survey results here:

  25. mad97123 says:

    This from Barrons over the weekend.

    The Standard & Poor’s 500 is up 12% year-to-date, to 1406, and most of these seers still are bullish, even though stocks are more expensive now, and worries about the economic backdrop remain.

  26. BigD173 says:

    If “much of Wall Street is underinvested,” then who is overinvested? Every share of stock is always owned by someone.

  27. VennData says:

    dh states, ‘… if they didn’t seem so manipulated by central bankers, algos, and asset managers and if liquidity wasn’t the prime driver, as opposed to earnings…”
    …but the operative word is “seems.” It only seems that way if you listen to CNBC, Fox, et al. Corporate earnings are at a record. Are all the US businesses in in the conspiracy?
    To say nothing of the deflationary forces set off by the housing price collapse. If the true equilibrium of the system is negative interest rates, then the Central bankers are relatively tight ( explains the slow relative recovery) and you are lucky to not have to pay to keep all that cash pants (comment above) loves.
    We have been in deflation for four years, you have been speared by Bernanke. Thank him.

  28. VennData says:

    BigD raises a valid point. The people who are over invested are the ones who bought in 2009 and 10.
    They have lot’s of stock to sell, get good dividend returns on the ETFs and stocks they keep… Mostly Indexers, Asset Allocators who reallocated when they were supposed to. That’s the beauty of asset allocation, it works.
    Recall the Hedge Funds were forced out of their trades due to leverage. Somebody owned every share at the March 2009 Bottom too, and those folks who held and picked up shares as they we automatically supposed to when their allocation was in not matching the breakdown of their holdings, have big gains.
    Hoping for America to fail so you can buy back in is not only a bad strategy, you won’t do i if you’re a ‘trader ahd listen to the squawking heads, CNBC “THIS is the time for active management” and political partisans.

  29. wally says:

    I’m in.

  30. philipat says:

    Great piece. The need for caution, however, is that we a 12 years into a secular bear market, typically averaging 16-18nyears in total duration. We have had two down legs and there are typically three, so if history repeats we will have another down leg sometime over the coming years. However, commodities and equities are a good place to be in times of QE. It’s impossible to time the next move down and, by then, the equity markets could move up another 20%. I think, on balance, equities remain a good place to be until there is another pullback of, say, over 3-4%, at which time it might be a good time to lock in that 3-4% against the 20% gains!!

  31. David987 says:

    Something is clearly wrong with that graph : the mention “Extreme bullish(bearish)ness : bearish(bullish) for stocks”. This interpretation of the future issue for stocks prices is wrong imo, because you can’t interpretate sentiment alone, without even a look at the prices. To make it short, the actual reading of sentiment would be bullish if prices were correcting. When this rallye will be over, I expect sentiment to rise again while prices fall.