Posts filed under “Contrary Indicators”

Not Quite Bubblicious Yet

DJIA-Gains
Source: BlackRock

 

It seems that everywhere I go over the past few weeks, I bump into some form of bubble chatter. Mom and pop are returning to equities means it’s a bubble, all the new stock and bond issuance is a bubble and, of course, the Twitter initial public offering indicates we are deeply in bubble territory.

Russ Koesterich of Blackrock, however, points out that the usual indicia of bubbles are nowhere to be found. He points out stock valuations are “no longer cheap, but they are still a long way from the peaks seen in previous cycles.” Equities trade for 2.5x book value and for 16.5x trailing earnings — far below the heady highs of prior bubbles. He notes the 1987, 2000 and 2007 peaks saw price-to-earnings ratios at 23, 30 and 17.5. The price-to-book ratio, meanwhile, peaked at close to 5 in 2000 and 3 in 2007.

He points to accompanying chart, which uses 5-year rolling gains off of market lows. That puts the rally into context of the prior collapse. By that basis, markets are not nearly as toppy as they were in 1987 or 2000.

I am legally obligated to point out that these bubble-callers all managed to miss the bubble in dot-coms, the credit bubble and the housing bubble. That they now spot a stock market bubble should be of comfort to nervous bulls. And if U.S. equities really make you nervous, look overseas, where international stocks are 30 percent to 40 percent cheaper than U.S. stocks.

 

Originally published at Bloomberg View

Category: Contrary Indicators, Investing, Psychology

Generational Lows: 1942, 1974 & 2009

  Click for ginormous chart Source: Merrill Lynch   I love the giant chart above using the overlay of the S&P 500 off the 1942, 1974, and 2009 generational lows as a guide. Its beautiful in its simplicity, and has a little something for everyone. The bulls get a chart that is bullish longer-term, the…Read More

Category: Contrary Indicators, Investing, Markets, Sentiment, Think Tank

Sell Side Indicator: Wall St’s Improving Optimism

Click to enlarge Source: Merrill Lynch/BoA   This is an interesting chart: Improving Wall Street sentiment is still no where near the levels associated with excessive sentiment. Despite the ongoing rally — or perhaps because of it — we are now all the back to the levels enjoyed at the lows in March 2009. Merrill notes…Read More

Category: Contrary Indicators, Sentiment, Technical Analysis

Japan versus Gold?

Charts like this make me want to Sell Japan and Buy Gold — at least for a quarter or so.   click for larger chart Source: Josh Brown

Category: Contrary Indicators, Technical Analysis, Trading

Polling the Public About Investing Is Loads of Fun!

Back in August of 2011, Gallup decided to do what they do best — which is poll the American public for their thoughts. In this instance, it was their thoughts on investing. The questions asked was simply: What do you think is the best long term investment? Their answers were very instructive: 34% of Americans said…Read More

Category: Cognitive Foibles, Contrary Indicators, Investing, Really, really bad calls

The Smartest Man in Europe

I have been reading this (for lack of a better word) series from Byron Wien for many years. I remain unsure if The Smartest Man in Europe actually exists or if it is a clever ruse that allows Wien to say things at arm’s length that perhaps he would not be able to if he…Read More

Category: Contrary Indicators, Investing

World’s Biggest ETF/Contrarian Indicator: GLD > SPY

GLD was briefly the world’s biggest exchange-traded fund. In August 2011, GLD had assets of more than $77 billion, surpassing SPY (SPDR S&P 500 ETF) for a short time. The SPDR Gold Trust’s market capitalization rose to $76.7 billion  — gold briefly topped $1,880/ounce. At the same time, SPY’s “capitalization” was ~$74.4 billion. I missed…Read More

Category: Contrary Indicators, ETFs, Gold & Precious Metals, Technical Analysis

World's Biggest ETF/Contrarian Indicator: GLD > SPY

GLD was briefly the world’s biggest exchange-traded fund. In August 2011, GLD had assets of more than $77 billion, surpassing SPY (SPDR S&P 500 ETF) for a short time. The SPDR Gold Trust’s market capitalization rose to $76.7 billion  — gold briefly topped $1,880/ounce. At the same time, SPY’s “capitalization” was ~$74.4 billion. I missed…Read More

Category: Contrary Indicators, ETFs, Gold & Precious Metals, Technical Analysis

Putting Investor Bearish Sentiment into Context

Individual Investors Are Not Buying It Click to enlarge   Lots of people have been discussing how negative investor sentiment is, showing the chart above. It shows markets making new all time highs as expectations that markets will be higher six months hence is at a mere 19% of AAII respondents. (See Individual Investors Are An…Read More

Category: Contrary Indicators, Investing, Quantitative, Sentiment

Sell Side Consensus Indicator Still Extremely Bearish

Click to enlarge Source Merrill Lynch     I’ve shown this chart several times over the past year, but its worth repeating: The Street remains very bearish by historical standards. Note this is not at all a short term indicator; and does operate with a bit of a lag.     Previously: Strategists Most Bearish…Read More

Category: Contrary Indicators, Sentiment