Posts filed under “Sentiment”

Does Record Picasso Sale Signal a Bubble?

The headlines screamed across the Web yesterday: Picasso’s Women of Algiers smashes auction recordTwo Artworks Top $100 Million Each at Christie’s SalePicasso Painting Sells for $179.4 Million; Sets Auction Record.

The record for paintings was joined by a record for a sculpture, when Alberto Giacometti’s “Pointing Man” was purchased by an anonymous bidder for $141.3 million.

Some people like to point to these auctions as proof of a financial market unmoored from reality. Like the “unicorns” — those tech startups valued at more than $1billion — many see it is yet another piece of evidence that the top is here, that we’re are in the midst of a huge bubble that is destined to collapse.

Whether we’re in a bubble or even an overvalued market is a worthy debate. But these examples are not proof of overvaluation or really much of anything else. They are anecdotal observations, one-off transactions in a ludicrously small market dominated by a ludicrously wealthy clientele. Given the choice between quantifiable data or anecdotal tidbits, you should always choose the data.  So no, these sales are not proof of anything other than the simple truth that some people have very large bank accounts that they are unable to exhaust through normal profligacy or by paying insane prices for a handful of unique objects of art.

There are many ways to understand why these stunning nine-figure transactions are not investment-sentiment indicators.

Anecdotes can tell you about a small subset of investors or even individuals, but they don’t measure the crowd. This is important, because sentiment is a yardstick of the crowd’s emotional state. Collectively, what are the masses thinking, saying and most importantly doing with their money? There are many ways to measure sentiment, and the best of these avoid anecdotes.

 

Continues here: Does Picasso Sale Signal a Top for Stocks?

 

 

Category: Bubbles, Sentiment, Valuation

Nasdaq Bubble Stole From Future Returns

Yesterday, we discussed why the Standard & Poor’s 500 Index has gone sideways for the past few months. The prime suspects were rich valuations, earnings crimped by falling energy prices and higher returns to be had overseas. Today, I want to look at the Nasdaq Composite Index. It closed at 5,056.06 yesterday, surpassing its March 2000 dot-com…Read More

Category: Markets, Psychology, Sentiment, Valuation, Web/Tech

Do Lower Gasoline Prices Boost Confidence?

Do Lower Gasoline Prices Boost Confidence? Aditya Aladangady and Claudia R. Sahm FEDS Notes, March 6, 2015     A gallon of gasoline currently costs one third less than it did last summer, as shown by the solid line in Figure 1. Gasoline makes up 5 percent of average family spending, so lower prices at the pump…Read More

Category: Energy, Federal Reserve, Sentiment, Think Tank

Top Issue for Americans? Bad Government

The Gallup polling organization is in the business of taking the pulse of the American public. A new survey detects a surprising shift in perceptions. It points not just to the nation’s sour mood and disappointment with the drawn-out recovery, but also to a sense that something different is now wrong with the U.S. In…Read More

Category: Politics, Sentiment

Rich Countries on Whether Any Day Is a Good One

This is such a strange data point . . .     Source: Pew Research

Category: Data Analysis, Digital Media, Sentiment

Wall St Ends 2014 More Cautious Than it Began

From Bank of America Merrill Lynch: The Sell Side Indicator — our measure of Wall Street’s bullishness on stocks — moved sideways in December, unchanged from November’s reading of 52.1. At the start of the year, it was 53.3. The indicator remains in “Buy” territory, as Wall Street’s bearishness is still more extreme than at…Read More

Category: Data Analysis, Sentiment

Beware Anecdotal Sentiment Readings!

It’s the time of year when predictions are in order. Not by us, but by other people. We have spilled plenty of pixels on why forecasts are folly (see this, this, this, this and this); we won’t revisit that well-trod ground, at least not today. Instead, I wanted to discuss the rather annoying tendency of…Read More

Category: Really, really bad calls, Sentiment

What Worries Investors?

Great graphic from Bloomberg

 

click for complete graphic
inflation deflation

 

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Category: Digital Media, Investing, Sentiment

Disbelief in Equities is What is Driving Them Higher

As a fan of investor psychology, I find sentiment intriguing. Measuring it is a challenge. We can’t trust what people say because they become bullish after they buy and bearish after they sell, convincing themselves that past trades were the correct way to go. Humans are notorious liars — especially to themselves. When they are…Read More

Category: Investing, Psychology, Sentiment

Playboy Bunnies, Mila Kunis and the Myth of the Celebrity Stockpicker

Last week, I came across the following headline: “As music sales fall, sax player Kenny G turns to stockpicking.” My immediate reaction: Uh oh. The last thing any bull market needs is for celebrities to be featured in the financial press. As soon as that starts, it means the bull market must be near a…Read More

Category: Contrary Indicators, Investing, Really, really bad calls, Sentiment