Yesterday, the DJIA closed at a new record high, at 15,056.20 while the S&P500 closed at 1,625.96.

While I keep hearing some people claim there is an excess of giddiness, please excuse me for failing to see it. My frame of reference is the 1999-2000 top, and I certainly do not see anything remotely resembling that sort of sentiment. We cannot say it even resembles the 2007 top.

Remember the Dow 10,000 hats on CNBC? The insane expense accounts, lavish spending? The forecasts of Dow 36,000? In 1999, the nonstop media coverage of markets resembled a home team making it to the Superbowl or World Series. Stocks had become the hottest sport there was. You could not attend a cocktail party or BBQ without the conversation turning to tech names doubling and tripling.

We have none of that now:

No Dow 15,000 hats on TV.

No media trucks lining the street outside the NYSE or Nasdaq to cover the milestone.

Hardly any mention of it on the nightly news.

Kevin Lane forwarded a note from a friend:

it took until 6:42 pm to get to it, which was a 5 second mention with just a studio read by Brian Williams. No remote from the floor, and they didn’t bother to drag in one of the stooges from CNBC (in one of those corporate co-branding efforts) to breathlessly tell us all what it all means.

This indifference is not the sort of thing typically seen at tops.

Look, I am not saying you have to see lines of blow being snorted off of a $2,000 a night call girl’s ass to say things have gotten irrationally exuberant, but how about a little something?

As we have been saying since 2009, this continues to the most hated rally in market history. Until that changes, I suspect it has farther to run . . .

Category: Markets, Sentiment

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.

49 Responses to “Exuberance? Euphoria? Hardly . . .”

  1. Peter B says:

    I was at a CSFB conference yesterday and the equity strategist there told us about his latest investor poll of the best performing asset class in the next 2 yrs. 90% said equities.

    • The public is not on board, but certainly the pros have been forced in

      Next question I would have asked the room: What is your present equity exposure? What was it 5 months ago? 2 years ago? When did you last add to it?

  2. MetFund says:

    “lines of blow being snorted off of a $2,000 a night call girl’s ass”?!! having trouble remembering this…

  3. [...] below $1400. Barry Ritolz now talks about how there is hardly any euphoria around Dow 15,000. Exuberance? Euphoria? Hardly . . . | The Big Picture Something about these 2 markets just doesn't fell right….i.e. Perhaps Gold has a lot lower to go [...]

  4. MayorQuimby says:

    We are overvalued a bit and priced for very solid growth which is still suspect:

    http://www.multpl.com/

    http://www.multpl.com/shiller-pe/

    Low rates make stocks more attractive however so much of this is offset.

    Personally – I don’t seen many 4%+ divvy payers out there I want to invest in here in the US so I’m thinking we do get some pullback entry points – if not, my money will have to go elsewhere!

  5. Global Eyes says:

    Two months after President Obama took the oath, the markets started moving higher. This should be labeled the Obama rally. Will it last two terms? I don’t know but like a fool I reduced my equity exposure last year.

    • VennData says:

      This rally is about investors anticipation that the Senate will return to GOP control under Mitch McConnell in 2014, and that Rand Paul will take the White House in 2016. Period. End of Story. i know this, because Obama is a Socialist and this rally could NOT be his doing.

      • wally says:

        Absolutely, VennData! Just waiting to return to the small-government, low-deficit, conservative years that we enjoyed under recent GOP administrations.
        Oh, wait…..

    • Chief Tomahawk says:

      More like the FASB 157 rally, in which level 3 assets no longer needed to be marked-to-market but rather could be marked-to-model. http://www.fasb.org/summary/stsum157.shtml This saved financial institutions arse. Then the healing began and market rebound away! The Fed, stepping in to buy Treasuries, pushed rates down launching a re-fi b00m which among other things allowed corporations to gain more earnings from reduced debt payments.

  6. Gonzop says:

    in 1999-2000 everyone and their dog was long (tech) equities – so everyone was talking about it, and everyone yes, could celebrate milestones. It was a popular event, for the populace.

    today only a selected few are riding this rally, vs. a middle class that is going through hell – so the very least Wall street (media) could do, is to shut up indeed, as every new milestone makes the 1% richer

    hence what exactly was your point?

    it is a very good thing that retail/the small guys are missing this rally as of now, and i sincerely hope they do not catch that hot potato with both hands above 1600 when the others want to dump it

    the only thing they can do now, is to patiently wait for the MA200.

    The closest thing to 2000 exuberance is the margin at punt. And also, that brand new dogma post-Cyprus:

    ‘deposits ain’t sure anymore so you might as well buy equities with same 40% potential drawdown, but the possibility of upside too, and dividends’

    dangerous, let’s talk in 3 months !

  7. call me ahab says:

    “Look, I am not saying you have to see lines of blow being snorted off of a $2,000 a night call girl’s ass to say things have gotten irrationally exuberant”

    That got me bust out laughing!

    FWIW- Roubini sees it the same way as you- And we don’t have Tom Brokaw on the air saying “how high can it go!” But to keep everything in perspective- we haven’t budged much in 13 or so years

    • b_thunder says:

      Exuberance? Euphoria? No, but the search for yet another Greater Fool Standing (how about a reality TV series under this name?) continues. The millionaire traders and OPM managers cannot understand how the brain of the bottom 90% works. The “pros” are all-in, and they can’t fathom that there are still folks with cash in their savings accounts. They don’t understand is that a 65-years old “boomer” who managed to save $100-200k and is barely “above water” with home equity has been on the sidelines for 5 years earning 0.1% while stocks are up 120%, he won’t be chasing the last 5% and will stay in cash for many years to come.
      Don’t count on my parent’s generation to join in. If anything, they are and will be the net sellers (which by the way one of the reasons why Bernanke, Kuroda and Draghi absolutely have to buy in order to prevent the “waterfall” of sales.) This time it will be members of the Wall st crowd that will be left without a chair when the music stops.

  8. [...] Barry: Okay, show me the exuberance…  (TBP) [...]

  9. contrabandista13 says:

    Equities are the cleanest shirt in the hamper…

  10. Peter B says:

    I think with 2 bear mkts in 13 yrs, public will only get so excited but yes, the pros are all being forced in. The institutional community is all in stocks. Everywhere I go, the bullishness is rampant on the ‘no where else to go theme’ and as long as the Fed is printing money…

    I’m not saying the mkt is going down here but when it does, some cash will all of a sudden be an asset class.

  11. [...] ETF holdings at 4-yr low – Reuters Are Stocks Cheap? A Review of the Evidence – NY Fed Exuberance? Euphoria? Hardly . . . – The Big Picture Don’t Sell Yet, Dow Headed to 18,000: Pro – CNBC Hedge Funds [...]

  12. dctodd27 says:

    BR -

    A few questions:

    1) Are you the type of investor who sells early (on the way up), or late (on the way down)?

    2) At this point do you know what it is you want to see before heading for the exits, or is it a case of knowing it when you see it?

    3) How much return are you willing to leave on the table knowing that when you do sell, it won’t be at the top but (hopefully) near it?

    Thanks.

  13. Here’s why:
    The Dow Closes Above 15,000, And It Still Doesn’t Matter

    That is because, even as stock prices and corporate profits have soared to new records, “human beings” have been left behind. The unemployment rate, at 7.5 percent, is still well above its pre-recession levels. Wages have stagnated, as you can see in the giant graphic above.

    Much of the market’s gains in the past few years have been due to the Federal Reserve making money cheap and keeping interest rates low, forcing investors into riskier assets like stocks.

    Meanwhile, investors are still suffering from post-traumatic stress following two massive bubbles and bursts — first in stocks, then in housing, in less than two decades. They can be forgiven — nay, encouraged — for being slow to break out the party hats and “Dow 15,000″ goggles.

    • VennData says:

      How were people “forced” into stocks? You don’t have to buy stocks.

      You can buy all kinds of things. Once you have your equity allocation, you should have been SELLING stocks on the way up. How are you forced into stocks? To keep up with the Jones’s?

      If you have been in cash for five years and now decide to buy stocks, that’s because you are a goofball who does not have a plan, does not have an asset allocation and listened to Fox News. None of these people are “forced” into stocks.

      • If you are required by law or personal necessity to net a certain yield from your portfolio, or if your allocation is at all sensitive to relative yield between stocks and bonds, then yes, you felt pressured to shift into stocks as interest rates fell and stayed down.

        Ask the insurers, who are trying to buyback annuities issued with what now appear to be overly-generous rates of return.

        Ask the foreign central banks (now investing in equities! what could possibly go wrong?)

        Ask the retirees, whose incomes have been decimated by Fed policy.

        Ask the pension funds…

  14. econimonium says:

    I think that it’s the overall dynamic that is making this “the most hated rally” and not anything technical or fundamental. By that I mean that there are a lot of people still hurting, and to hype the market after the events of the recent past won’t fly in the same way for the general public. Before this, the myth that everyone could make money in the market, and on housing, and spend like the 1% was alive and well. With unemployment where it is, people’s houses still underwater or close, and people’s savings shrunk, no one is in the mood to toss on Dow 20,000 party hats as the reality of where the vast majority of people are is still sinking into them.

    The short take, therefore, is there is no upside to media hype about this and it actually lies on the downside. This is a “hated rally” because it’s popular to wear a hair shirt still, especially if you’re a Republican because if you don’t, you’re implicitly saying Obama is doing a good job. How about that liberal media huh?

  15. peterkrause says:

    BR may have given us a new indicator to track: I remember reading about that call girl in the papers; she was “working” to pay her tuition to law school. You don’t see articles like that anymore. So watch closely for news of lawyers signing up to be call girls (is there even a temp agency for that?) That will be the signal to get out. Snort!

  16. V says:

    CNBC viewship at 8 year lows, so I guess nobody is tuning into Cramer either … I wonder why.

  17. 1leone says:

    Whilst I agree in many ways, I think there are differences with prior tops and one needs to be able to identify correctly where the ‘euphoria’ occurs. People generally attribute reversals as being caused by stock markets when in fact, they are more often than not the victims rather than the cause. To me, the primary definition of euphoria is the price action of the underlying asset. In other words, when gains tend to be fast, large and in runaway mode.

    WIth this definition in mind, the only euphoric stock market top in my opinion, was that of 2000 and more so with the Nasdaq which subsequently brought down everything else.

    The top in 2007 however was a real estate top which goes hand-in-hand with a credit boom. Subsequently, when that collapsed the stock market followed. Remember, stocks we not in

    Again, today, the ‘euphoria’ (which by the way, needs not to be apparent in the street) lies in the bond market. Without a doubt on the corporate side and most probably on the sovereign side too. When this peaks, the markets will duly turn south irrespective of the level of participation.

  18. Tutti says:

    Hey Barry.

    Isn’t comparing our current market exuberance to the 2000 top as silly as comparing the next panic from any correction and comparisons to the 2008 crash? 2000 saw the ending of a massive secular bull – I don’t believe anyone really thinks that is the current situation.

    A 25% correction +/-, which we havent seen the likes of since Oct 2011 would not only be normal and help us to higher prices, but to many over leveraged and late-to-the-part players feel like 2008 – at least in their own portfolios.

    I digress. It has become almost a derision to call someone bearish after a 4 year rally. By bearish I mean someone who expects normal pull backs and god forbid a correction to take the fizz out of the soda and buy at better pricing. That type of scorn only seems to show its face at tops. Maybe intermediate tops, but tops none-the-less.

    Lastly, if we are debating that there isnt a bubble, than in fact there is one.

    Love the new site.

    Tutti.

  19. martin66 says:

    “Look, I am not saying…”

    May be the single best sentence you have ever written. Certainly the catchiest.

  20. Definately at “Excitement” on the Investor’s Cycle of Psychology. Closing in on “Thrill,” but still a long way from “Euphoria” (i.e. Exuberance)… http://thebuttonwoodtree.wordpress.com/2013/03/27/cycle-of-psychology-excitement/

  21. sublimaze says:

    Maybe, if we are in a long term secular decline sentiment will not reach crazy levels at the top. One thing I know for sure, Doctors are fully invested. There is no better sell signal.

  22. wally says:

    To me it is nothing but a healthy sign to see an ebbing of the ‘cult of equities’ among the general public.
    When Joe Six gets into stocks, he’s speculating with what he thinks is play money. Well, he lost that last time around and he’s busy now trying to keep his job and get his home back above water.

  23. [...] all the Dow 15,000 exuberance?  (Big Picture also [...]

  24. I think this post missed a vital point: one must look for the exuberance and euphoria among the market participants, which may not be the same as the general population. The 1937 market top was very real but it didn’t have the same kind of participation as the 1929 top.

    Also, all the “I don’t see any euphoria” claims are based on TV… so it’s really only one claim, and it’s based on a dying medium. No one watches TV anymore. And especially not anyone with money to invest. There’s plenty of cheerleading on the internet, though.

    Personally I think the three clearest signs of euphoria are (1) Everyone’s justification for investing is based on the belief that the party won’t end while the Fed is putting the blow on the hookers for them, and nothing about fundamentals; (2) Margin debt is hitting all-time highs again; and (3) the national mindset about credit has shifted from Minsky’s “hedge” finance (debt levels should be low enough that income is sufficient to amortize the debt) to his “speculative” mode (income is only sufficient to cover interest, but not to amortize debt).

    Meanwhile, people are overlooking the fact that the Fed’s credit spree is largely balanced by deleveraging elsewhere, and most of the new credit is rapidly extracted from the domestic economy by either (1) the trade deficit or (2) harvesting as corporate profits (much of which are either trapped overseas, or being used to repurchase stock from insiders at elevated prices). Overall systemwide credit growth in 2012 was the 6th-lowest in the 32 years of data in the Fed Z.1 series.

  25. Joe says:

    “Euphoria on Wall Street” is part of it. But it is by no means all of a serious blow off top.

    The Bay Bridge from Oakland into SF has some billboards right where the bridge lands in SF and offsets to the North. The effect is that you approach the billboards head on for a quarter mile. Given the commute and weekend traffic, the sites are prime advertising. Bringing the family home one weekend 97-2000, I saw that Applied Materials had bought the biggest and the best to advertise themselves with a non specific neat graphic/slogan style ad.

    Possible reasons for a semi tool mfg selling multimillion dollar capital equipment to a very tiny specialized market to advertise in a format that primarily captures commuter eyeballs ;

    You’re really expecting that a buncha guys in cars will see the ad and says, ” I’m going to be buying a wet etch tool and a coupla ion implanters next month, and that reminds me that Applied Materials would be a good company to check out before I write out a $10+ mil check. I’m glad the billboard reminded me that they are still around.”

    Applied was actually promoting their stock. And they thought that commuters were exactly who they needed to interest in investing in Applied.

    Blow on Wall Street hookers asses’ was what was apparent in the financial industry in the dotcom runup to 2000, but there were similar excesses through out the high tech industry. I got some stories about working in Silicon Valley back inna day. But that was a time that I don’t expect to see replayed soon.

    I’m expecting a “new euphoria” to match the “new normal”. A reset to match the new era, a more restrained euphoria. May be a “giddyness blowoff.”

    That said, I don’t see that here and now either.

  26. Imo you’re making the mistake of relying on anecdotal evidence – much of which consists of fully invested bulls telling each other how many bears there allegedly are – as a replacement for quantitatively ascertainable evidence, such as positioning data and polls of actual traders in futures as well as advisor recommendations. Apart from what others have observed about margin debt, net speculative long positions in all stock index futures combined have for instance just reached a new all time record high, with the heaviest concentration in the most speculative sectors of the market, such as small caps. The Barron’s big money poll has recorded an all time record high in net bullishness – with a full 96% (!) of fund managers declaring themselves ‘bullish on stocks for the next 5 years’. Even the 76% bulls in the nearer time frame exceed the previous records by a huge margin (almost 20% above the highs of late 1999 if memory serves). Mutual fund cash reserves relative to assets are at a mere 3.6% – 20 basis points above the all time low set last year, and 80 basis points below the record low attained at the end of the secular bull market period in March 2000. The Hulbert Nasdaq adviser sentiment index has bested its bullish consensus peaks of March 2000 already twice in a row this year. Mind, these are all hard data. You mention party hats, but in cyclical bull markets in the context of a secular bear market – even if they are very strong ones – there are no longer any party hats. Rather, the broader public will very likely keep selling its individual stock holdings into rallies (e.g. public participation in Japanese stocks – individuals holding stocks by themselves or holding shares in mutual funds – collapsed completely, and thereafter the bear market STILL continued for another 15 years). This is mainly a matter of demographics – more and more boomers retire, and as they do, they stop buying stocks. Were there party hats in 2007? I don’t remember seeing any. Did the market collapse by 58% from the highs anyway? Why, yes, it did.
    Now, all these sentiment data tend to get more extreme and the extremes are much longer lasting when the market is largely driven by professionals. But that doesn’t mean that extreme herding is suddenly no longer a sign of irrational exuberance. The pros may trade stocks back and forth between them, the market may get egged on by free money from the Fed (the money supply has exploded by 80% since mid 2008), corporations may pile into stock buybacks just as they did in 2006 and 2007, and there may be a fervent belief that stocks cannot go down, and for a good while it can ‘work’. The longer it works, the more dramatic the denouement is likely to be when it comes. Sentiment data are not precise timing indicators, and the trend can continue to be the bulls’ friend. There is certainly no evidence for a trend change yet. But to argue that the data do not reflect extreme enthusiasm is really a stretch, especially when the argument is largely based on anecdotes. As far as can be ascertained from hard data, speculators are all sitting on the same side of the boat to an extent never before seen.

    • Good run of data pater tenebrarum — I’ll see what I can pull together that is non-anecdotal

    • Mike C says:

      Thanks for the data Pater….it paints a quite interesting picture. I would agree that it is misleading to conclude much of anything from what Joe Q. Public is doing. I’ll say this…if they finally get sucked back in at 1600+ after missing 666 to 1600, I’d have to think that is the final nail in the coffin of this bull.

    • OscarWildeDog says:

      Then our goal then is to make ALL those polled bullish (100%), make long-term felons the only sellers (give them govt money to sell their ill-gotten gains to aforementioned bulls (everyone)), and then the market will NEVER go down. Wal-Mart will be valued at a trillion or so, Facebook about $200 billion, and so forth. We can effectively inflate all 7000 or so public companies traded well beyond their value. Because no one will say when the Fed turns off it’s sparkle machine. It too will go on forever. Everybody is just nuts.

  27. Angryman1 says:

    I am waiting for treasuries to finally sell off from the fear factor. It will really rise then. That is the time to get out when that process is complete which could take years.

  28. jdonkey says:

    BR,
    You are correct in that this maybe the most hated rally in history, but only among the financial community.
    The average citizen is now indifferent to Wall Street thanks to the events of the past decade. The belief that the ‘game is rigged’ is what most people outside the financial industry believe. As a result, the average person does care or get involved in the markets anymore. I attended a neighborhood Kentucky Derby party and no one mentioned the market even though several financial advisors were there. In 1999-2000 these same people blew $10 K to attend the race in person because they felt wealthy. Bernanke’s plan to use the wealth effect to improve the overall economy has not worked its way down to the average person. Perhaps it is due to housing. The average persons largest ‘investment’ is their residence. I suspect the value of the average house is not yet back to hitting all time highs even as the SP,Dow,Nas do so on a seemingly daily basis.
    Your title of this article is right on and your last thought also seems like a good insight. After all, it really isn’t about being right or wrong, it’s about making money.

    • dondi says:

      What makes you think houses will recover their peak “value” any time soon? Or ever? The house I lived in for 35 years was bought for $17K in 1957, and was worth $24K in 1970 when I moved in as a renter. At the time, that was 3.3x my 1969 engineer’s starting salary ($7,200/year). In 2009, needing a complete renovation, it sold for $870,000 – 17x an engineer’s starting salary. If I’d had the down payment, I could have bought the house in 1970, but to buy and live in that same house in 2007 would have taken *$90K for 30 years* – almost my entire *gross* salary. [After renovation, it sold for $1.6 million.] The 30-year bubble inflation of housing prices has resulted in housing being an unaffordable burden, particularly in the face of declining household earnings. Bernanke’s (and the banks’) attempts to reinflate the bubble are doomed to failure because the “value” of the assets is completely artificial, and economically unreasonable.

  29. OscarWildeDog says:

    OK, so what’s the question? Why isn’t there more exuberance? Why is this not like 1999?
    1. BECAUSE PEOPLE WHO WALL STREETERS DON’T RUB ELBOWS WITH ARE SUFFERING.
    2. BECAUSE THE UNEMPLOYMENT RATE IS AT LEAST TWICE AS HIGH AS IT WAS 14 YEARS AGO (AND THE U-6 RATE EVEN HIGHER)
    3. BECAUSE EVERYONE IN THE MEDIA IS TALKING THEIR BOOK, THEREBY TALKING UP THE MARKET.
    4. BECAUSE MOST OF US ARE SMARTER NOW AND REALIZE THAT THE COMPANIES WE ARE BUYING AREN’T WORTH WHAT WE ARE PAYING.
    5. BECAUSE OBAMA COULDN’T EXTRICATE US FROM A CRISIS OF ANT INFESTATION ANY MORE THAN HE CAN LEAD US OUT OF THE ONE WE’RE IN CURRENTLY.
    6. BECAUSE, JUST LIKE IT IS “UNPATRIOTIC” TO SPEAK ILL OF OUR FOREIGN IMPLICATIONS (WARS), IT IS HEINOUS TO DISCUSS THE NEXT DOWNTURN. (I MEAN, SOME DUDE ON CNBC SAID TODAY THAT HE EXPECTS NOTHING BUT RISES IN THE MARKET ON THE WAY TO S&P 1800 THIS YEAR. YEAH, RIGHT.
    7. BECAUSE EVERYONE AND HIS BROTHER KEEPS SAYING THAT THERE IS STILL MONEY ON THE SIDELINES (JUST LIKE THE LAST FIVE YEARS); THAT FUND MANAGERS MUST/HAVE TO MAKE THEIR QUOTAS, SO THEY KEEP ON BUYING (IF THAT WAS THE CASE, THE MARKET WOULD NEVER GO DOWN BECAUSE MANY MANAGERS DON’T OR CAN’T MAKE THEIR QUOTAS, YEAR OVER YEAR.); BECAUSE THE STOCK MARKET IS THE ONLY GAME IN TOWN; AND A HUNDRED OTHER “RATIONALES” WHY THE MARKET WILL ALWAYS GO HIGHER AND NEVER COME DOWN YEAAAAAAAAAAAAAAAAAH BABY!

    I COULD GO ON AND ON AND ON…

  30. Monty Capuletti says:

    Totally agree with Barry, but he makes the mistake in assuming positioning matches posturing (ie- watch what they do, not what they say). Hogwash. Pater’s data is spot on, and he leaves out a bunch (Look at CLO issuance vs 2007, re-emergence of Mezz/Cov-lite loans in Cmcl RE, Bonds funds buying equities- See WSJ story last week? 17 weeks in a row of Positive Equity fund flows- What public apathy??)

    The truth is those playing along are doing so believing the “house” (fed) has given them the special key (Remember Contra?- Once you got the code- you could get to Level 14 and leap over every other layer) and it’s success in fixing prices in bonds means similar windfalls for equities. It is an entirely cynical participation, like betting alongside the guy counting cards at the blackjack table, knowing it’s only a matter of time before the casino figures it out and he’s kicked out.

    This may keep going, but let’s be honest with ourselves and understand why

  31. Behavioural patterns suggest the indices are long past due for a major correction, the delay no doubt related to stocks being generally at fair value today. My TRI model indicates GDP growth rates will wane after 2Q13 for many quarters. This limiting factor on Revenues (and Profits for some) may be the impetus for a reversal upon one of coming earnings seasons. However steep the move would be short-lived ‘cuz when the FOMC starts to raise its key rates in Jan/2015, there will be a mass exodus from bonds into equities. That rally will indeed defy fundamentals and would set up a more appropriate behavioural correction. My confidence level is much higher for the latter down move.

    gdp outlook charts: http://trendlines.ca/free/economics/RecessionIndicatorUSA/USA-TRI.htm

  32. [...] Exuberance? Euphoria? Hardly . . . | The Big Picture [...]