Posts filed under “Contrary Indicators”
Yesterday in the office, we were discussing when to take a little something off of the table. This upthrust has been very strong (itself a positive), but we tend to be wary when rallies are seemingly built on rumors. The 19th trial balloon of some new ECB intervention should not trump slowing fundamentals and peaking earnings.
With many of our holdings at multi-year highs, is this where we sell a bit of the long exposure? The key to running an asset allocation model is not so much what to do, as when. Is now the ideal time to sell?
I have called this move off of the March 2009 lows “the most hated rally in history.” The discontent of underinvested fund managers has been a positive. Indeed, the Bill Gross comments on the end of the cult of equities yesterday was itself bullish (I’ll have more to say on Gross later this week).
But its not just the Pimco boss; according to Merrill Lynch’s quant group, Wall Street’s “sell side strategists are now more bearish on equities than they were at any point in the last 27 years.” And we know as a whole, this group tends to get it wrong at key inflection points.
After the Fed liquidity fountain, this is perhaps the single most bullish thing I can think of. The difference being the Fed juicing is an artificial external input into markets; excess bearishness is pure behavioral finance at work.
Equity sentiment hits a record low
Equity and Quant Strategy
BofA Merrill Lynch 01 August 2012
So I am still catching up with some of the more interesting reads from while I was away, and this THIS damned cover made me fall off my chair: Source: Barron’s A few words about this: The classic magazine cover contrary indicator is a non-business press issue. This is because by the time…Read More
Over the years, debate has waxed and waned over the effects of the minimum wage and/or immigration policy on employment, particularly teen/youth employment. When the issue flared up most recently, a couple of years ago, I posted a rebuttal to that argument here, my point being that it was – at least this time around…Read More
Following up on a previous matter, Karl Denninger posted what is supposed to pass for a rebuttal to my recent post on government spending. To my eyes, as Jay Bookman so aptly put it, it looks like “the octopus trick, squirting black ink to cloud your retreat.” True enough. Anyway, done with that discussion. Paul…Read More
>; Update: the Gallup poll used the word “Best” not “Safest”. Jordan Weissmann has a fascinating discussion going on at the Atlantic about a recent Gallup poll regarding “safe investments.” (The full discussion is well worth your time). Its appears that a plurality of “Americans believe Gold is the single safest long term investment option.”…Read More
Hilariously Ill-Informed, Shockingly Clueless, Cognitively Impaired, Ignorant Commenters at Yahoo Finance
I’ve been meaning to address this for some time, and today is as a good a time as any. Over the years, I have participated in interviews at Yahoo Finance — its always a fun time, Aaron Task, Jeff Macke, Henry Blodget, Dan Gross & Co. are very sharp guys. Its usually a short, smart…Read More
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