Posts filed under “Contrary Indicators”
Among the exercises I occasionally undertake is to dig into the history books and see, in retrospect, how things have played out relative to what the punditocracy had proclaimed (works with punditry on politics, markets, economics, sports, etc.) . With Barron’s releasing its semi-annual “big money” survey, there’s really no better opportunity to page back through history. As we went through the worst economic near-collapse in generations, I always find it most instructive to start my analysis in the summer/fall of 2007 and take it from there. (I will never, ever forget attending a very small dinner on the evening of October 2, 2007 (at Casa Lever, then Lever House), at which David Rosenberg was the speaker. He laid out his assessment of what was happening – and what was going to happen – in the economy, and the group of 12 or so (most unfamiliar with his work or world view) looked at him as if he were a Klingon. Total disbelief. The S&P500 peaked one week later to the day – October 9, 2007.)
The current big money poll (Reason To Cheer), brings us this (S&P500 = ~1380):
America’s portfolio managers see more gains for stocks in our latest Big Money poll. They are wary of bonds, hopeful about the economy and predict that President Obama will be re-elected.
On that note, let’s have a look at where the Barron’s big money participants stood in early November 2007 (S&P500 = ~1520):
Although U.S. money managers are less optimistic than in the spring, bulls still outnumber bears by more than 2-to-1. Some even say the Dow will top 16,000 by mid-2008. Insights into bonds, politics, the Fed and more.
Can you see where this is going? We were on the cusp of the worst recession in 70+ years and a market that would lose 50+ percent peak-to-trough. The writing was on the wall in a huge, bold font.
That article contained this graphic:
Suffice to say that following the Barron’s big money poll in November 2007 was a money-loser.
Fast forward to April 2008 (S&P500 = ~1400)
The professional investors surveyed in our latest Big Money Poll are getting set to jump back into stocks. What they like, and why.
That poll contained this graphic:
Moving on to November 2008, the Barron’s big money poll was titled A Sunnier Season, and teased with this (S&P500 = ~970):
Barron’s latest Big Money poll reveals unrelenting bullishness among many money managers, despite their pronostications [sic] for a “contagious” recession and punk profits through 2009.
The article contained this gem: “The managers also cast their votes for BlackBerry maker Research in Motion (RIMM), whose shares have been decimated this year…” RIMM was mid-50s at the time.
In April 2009, when it was, literally, time to margin your account to the hilt and throw it all into equities, the Barron’s big money participants were cautious (S&P500 = ~855):
The pros in our latest Big Money poll say they’re bullish or very bullish about the stock market. But they have good reason not to jump in with both feet yet.
They were, of course, wary at exactly the wrong time:
For one, just 56% of today’s poll participants think the stock market is undervalued, down from 62% last fall. Thirteen percent say stocks are overvalued, up from a prior 7%. And an alarming 58% say the market hasn’t bottomed yet, even though the Dow Jones industrials hit a low of 6469 in March, before recovering to a recent 8100.
The bear market had clearly taken its toll on the psyche of the managers who participated:
In November 2009, Barron’s titled its big money poll Treading Carefully, and teased with this (S&P500 = ~1050):
The bull is still in charge, say America’s money managers in our latest Big Money Poll. But it pays to be cautious, as bargains are getting harder to find. The case for Microsoft.
April 2010 brought Be Very Careful (S&P500 = ~1190):
The bulls in our Big Money poll pulled in their horns a bit and see only tepid gains for stocks between now and year’s end. Stay away from bonds.
The S&P500 closed the year at 1257, up an admittedly “tepid” 5.6% on a price-only basis. The 10-year US Treasury went from about 3.80 to end the year at about 3.31 after hitting about 2.40 in October and then selling off – there was no reason to “stay away” from them.
November 201o brought us Bears, Beware! (S&P500 = ~1190)
America’s money managers say stocks are cheap and the economy will keep growing. Why they’re bullish on tech, bearish on Congress.
The November 2010 poll showed continued caution regarding the bond market, and offered up another majority opinion about a “bond bubble” which has yet to materialize (count me among those who’s not been in the bubble camp):
On we go to April 2011, in which the big money poll was titled Watch Your Step (S&P500 = ~1340):
America’s money managers are bullish in Barron’s latest Big Money poll, but picking their spots with care. The crowd is seeking safety in big, defensive stocks.
> Whenever we have a very red or green day, I like to find the most persuasive piece I can arguing for the contrary position. Today, that would be something bullish. What is rather surprising is that I found just such an upbeat contrary take in the usually skeptical Alan Abelson’s column. Abelson notes that…Read More
Back in February, we looked at the Skyscraper Index Building Bubble. This is the money shot from that report: > Note I posted a small low res shot so as to not overload the servers; if you want to see the full report, click here — otherwise, to see the larger version of…Read More
We have many rules of thumb for Contrary Indicators. When it comes to magazine covers, we look for a mainstream (not business) outlet joining a trend in progress as it reaches a cathartic moment. Media jumping on a bandwagon can augur a top or bottom just as a major trend reaches a climax. Yesterday, we…Read More
If this week’s cover story in Barron’s cover article on a housing bottom looks vaguely familiar, its because it is familiar. Almost 4 years ago, the magazine published pretty much the same article saying mostly the same things. In the July 14, 2008 edition, Jonathan R. Laing wrote “Bottom’s Up: This Real-Estate Rout May Be…Read More
This week’s New York magazine — a non Business publication — has a rather bearish cover discussing “The Emasculation of Wall Street. Last week, I mentioned the Barron’s cover was somewhat bullish, with the caveat that Barron’s is a business weekly. New York magazine is more general interest — its not Time or Newsweek, because…Read More
Uh-oh: “I Just Got Here, but I Know Trouble When I See It” > That headline and image is the cover page of the Sunday NYT Business section. It may be the closest thing I have seen to an excessively negative magazine cover indicator in a while. In general, I am negative about the economy…Read More
I don’t often find myself in agreement with bulge firm research, but this is in line with my beliefs: “This year, inexpensive stocks have simply grown cheaper, with the most notable example of this being Financials. Three of nine industries that make it into our value trap model this month are in the Financials sector,…Read More
I am not particularly bullish these days — 50/50 stocks versus cash/bonds — and while we certainly could see a bounce up towards the 1250 level on the SPX, I am not sanguine about the next 2Qs of market performance. That said, the chart below may be a very short term, bullish indicator. As we…Read More
> A recent Gallup poll found 31% of US workers are “worried they could soon be laid off.” That number is “similar to the 31% seen in August 2009 but double the level recorded in August 2008 and for several years prior.” This could have several interpretive meanings for the markets and economy: • Negative…Read More