Posts filed under “Sentiment”

Too Bullish or Too Bearish?

One of my favorite pastimes is dissecting accepted Wall Street wisdom to see if it contains any value for investors or traders. Often, upon examination, the widely held beliefs turn out to be closer to magical thinking than financial acumen.

One of the more recent examples is the way some analysts use data on sentiment to determine how much an investor should allocate to equities. The problem is that the sentiment data is inconclusive and sometimes contradictory. There is no signal within the noisy data.

Sentiment is extremely difficult to use as an indicator because it is only rarely at the extreme readings needed to generate a reliable trading signal. Recall the March 2009 low, where every measure of sentiment was deep in the red. Or October 2002, by which time the Nasdaq Composite Index had fallen almost 80 percent from its high and everyone hated tech stocks. These extreme events are rare.

One of the analysts who has observed these phenomena for many decades is Laszlo Birinyi, formerly of Salomon Brothers, and now of Birinyi Associates. In this weekend’s Masters in Business interview, Birinyi describes why so many sentiment measures are worthless. There is no usable signal in the American Association of Individual Investors bull/bear survey, Birinyi says. Many other such polls also lack a consistent methodology or are otherwise flawed. They are useless to investors, he says.

Continues here

 

 

Category: Markets, Sentiment, Trading

1958: Public Investing in the Stock Market as Never Before

This week in 1958: LIFE Magazine highlights a strange new phenomenon: The public is investing in the stock market as never before. “On the average,” reports LIFE, “500,000 new customers a year have been getting into the market and 8.6 million Americans now own some kind of common or preferred stock…. To an extent which…Read More

Category: Investing, Markets, Sentiment

Household Rotation from Fixed Income to Equities

  Today’s chart comes to us from Torsten Slok, the chief international economist at Deutsche Bank AG. While rumors of an institutional rotation — selling equities and buying fixed income — swirl, we see the opposite behavior from households. Continues here    

Category: Investing, Sentiment

About David Tice’s 60% Crash Call . . .

Earlier this week, Prudent Bear fund founder David Tice warned of an imminent crash — as bad as 30-60% down on the S&P500. One small thing: This is pretty much the same call that Tice made in 2010 and 2012. Apparently, if you make the same crash call every 2 years, most of the media…Read More

Category: Markets, Really, really bad calls, Sentiment, Short Selling

In Stock Market, Anxiety Can Be Good Thing

Source: WSJ

Category: Digital Media, Investing, Sentiment

Mauldin: Bubbles, Bubbles Everywhere

Bubbles, Bubbles Everywhere By John Mauldin August 15, 2014     Easy Money Will Lead to Bubbles Excess Liquidity Creating Bubbles Humans Never Learn Anatomy of Bubbles and Crashes A Few Good Central Bankers Jack Rivkin at His Best Dallas, San Antonio, and Washington DC     The difference between genius and stupidity is that…Read More

Category: Books, Sentiment, Think Tank

Wall St Bullishness vs Equities Complacency

Funny to wake up after yesterday’s selloff to see two such diametrically opposed views from major investment houses:    

Category: Analysts, Sentiment

Edginess or Extrapolating The Unextrapolatable

Edginess. No, I am not referring to the one sought by my daughter by rolling her own and pushing boundaries (fortunately, for a parent, eschewing the tats, for now at least), but as in uneasiness, anxiety, disquietude, restiveness, worry, and an increasing sense of agitation of the type that George Soros wrote about in his…Read More

Category: Sentiment, Think Tank

Where Did All the Bulls Go?

Source: BofA Merrill Lynch, Global Research, Bloomberg   Continues here      

Category: Markets, Sentiment

Does Increased M&A = Potential Market Top ?

FT: When investors are complacent, stupid deals happen Source: FT     Last week, I pointed out some statistical errors in a chart suggesting that Rupert Murdoch’s bid for Time Warner was a sign of the market’s top. The chart had enough omissions to render it useless. Today, I want to show you a (slightly)…Read More

Category: M&A, Markets, Sentiment