Posts filed under “Contrary Indicators”

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 interview with insightful questions and fun topics.

Then there are the Yahoo (almost message board) comments.

I cannot tell you what a wonderful tell — just top notch contrary indicator — these have been over the years. Check out Sucker’s Rally Alert: Dow Going Below 10,000 (Aug 12, 2008) — its too bad that when they redid the site, Yahoo lost the Incredibly Bullish comment stream, just as we were heading right into the collapse.

The opposite played out, on March 9th 2009: “Big Bear Market Rally Coming,” Says Noted Bear Barry Ritholtz (recorded March 9th webcast Mar 10, 2009 08:35am) The comments were incredibly negative to any sort of good news.

More recently, we did Bear Days of August Might be Over, Says Barry Ritholtz in September 2010, just as QE2 was ramping.  (These comments were not much better: House Prices Are Still 10% Too High, Says Barry Ritholtz).

Which brings me to this week’s appearance. 2 negative pieces, one positive

-U.S. Economy Right Where It’s Supposed to Be, Ritholtz Says

-Despite Falling Prices, Housing Sector Is Recovering. Really.

-America Is So Not In Decline: Ritholtz

You have to go read some of the comments — especially on the America Is So Not In Decline  — they are simply hilarious examples of cognitive foibles, selective perceptions, bias and just plain human silliness you will ever see. I tried pushing back on a few of them, but its a tide of ignorance, and I only have 2 thumbs to stick in the dike.

Read ‘em and understand why most investors under-perform . . .

>

Previously:
You MUST read the comment streams at Yahoo Tech Ticker (September 3rd, 2010)

Category: Contrary Indicators, Psychology, Really, really bad calls, Web/Tech

Seen This Movie Before

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.

Read More

Category: Contrary Indicators, Economy, Finance, Financial Press, Investing, Markets

Market Corrections of 4% or More

> 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

Category: Contrary Indicators, Markets, Psychology

Skyscraper Index

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

Category: Contrary Indicators, Digital Media, Psychology, Valuation

Uh-Oh: Economist Cover “Can it be…the recovery?”

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

Category: Contrary Indicators, Economy

Barron’s: Home Prices Are About to Bottom (take 2)

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

Category: Contrary Indicators, Psychology, Real Estate

Magazine Cover Indicator: New York “End of Wall Street”

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

Category: Contrary Indicators, Investing, Psychology

NYT Sunday Business: Magazine Cover Indicator?

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

Category: Contrary Indicators, Psychology

Financials = Value Trap

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

Category: Contrary Indicators, Valuation

Blog Traffic Goes (Short Term) Bullish in August

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

Category: Contrary Indicators, Psychology, Weblogs