This seems to be an ongoing sentiment debate we’ve been having for too long: How Bullish is the investor community really? We’ve looked at this repeatedly (here and here most recently) over the past few months.
In Sore Winners, Barron’s Alan Abelson answers the quesion with one word: Very:
"What strikes us about the current investment scene is how defensive, even delusional, the raging bulls are. And despite rolling in the long green by grace of the big market year, what a bunch of sore winners they are, insistent that everyone else is bearish and only they, brave souls, have the courage to be optimistic.
What hokum! For the fact is everyone’s bearish except the mutual funds (whose motto is "cash is trash") and the hedge funds and the private equity funds, traders of every stripe including the racy types who trade futures and options (the Market Vane and Consensus Index surveys: both 70% or higher bullish), Joe Doaks and Jane Q. Public, investment advisers (Investors Intelligence: 56.5% bulls, 19.6% bears) and brokerage house strategists (for whom "sell" is a four-letter word). Did we leave out anyone?-oh yes, and the occasional tourist from Mars.
If everybody’s so darn bearish, pray tell, who has been buying stocks like there’s no tomorrow the past couple of months? Or are they a new breed of masochistic bears that gets their kicks from buying stocks because they just know the market is doomed to tank?
All of which gives us a strong sensation of déjà vu and, more particularly, why this glorious new year of 2007 seems so much like the not-so-glorious year of 2000. As we remember, 2000 began amid enormous euphoria, with the stock market headed for the moon. While the rationalizations at the time from the good-cheer incorrigibles of why the market was neither pricey or risky differed from the current versions of why the market is, if anything, undervalued, the reasoning is as flawed now as it was then.
As we also remember, 2000 ended in tears and tears that kept flowing for a long couple of years. So keep a generous store of hankies at the ready and hope the denouement to the current manic mood doesn’t do quite as much damage to your psyches, let alone your pocketbooks. We were about to say, Happy New Year!, but maybe we’ll wait for a more propitious juxtaposition to do so."
That first paragraph is a keeper . . . Say whay you might about Abelson — the boy can sure write.
UP AND DOWN WALL STREET
MONDAY, JANUARY 1, 2007
Some of the recent Housing data has been “encouraging:” • Sales for existing homes rose in November for the second straight month; • New single-family homes rose 3.4% in November (seasonally adjusted), following a 3.8 percent decline in October; • Inventory backlog declined to a 6.3-month supply in November (from 6.7-months); • The 4 week…Read More
Once more unto the breach, dear friends, once more;
Back in the studio tonite, at 5:30 – 6pm. The topics will include THIS, as well as the market rally, Holiday Retail Sales activity, New Housing data, and of course, other more amusing economic data.
Guests include the forthright John Rutledge, and Art Laffer and Jim Huguet (author of Great Companies, Great Returns).
UPDATE: December 27, 2006 7:20pm
A classic example of "leaving it in the locker room." No only did I only get in two wishy washy sentences, but the best stuff came during the commercial breaks between segments.
We went over the long and short sectors, individual names, and nothing made it on the air.
Best line: the day I throw in the towel and flip Bullish, is the day you want to shor tthis market to all hell.
Better luck next year
A few random thoughts about these items:
1) Its the last week of the year, volume is thin, and mutual fund are having some fun.
2) November’s new sales numbers are encouraging, but recall just how subject to revision this data is:
The Census Bureau counts a house as sold when the contract is signed. If a buyer cancels the contract, however, Census does not readjust the numbers. Thus, sales are overstated — and inventories understated — for the month the house is initially sold. (And when that house is sold, the reverse happens).
Note that the homebuilders have been reporting cancellations in the 30%+ area — you can see why these initial numbers are suspect.
3) The sharp 15.6% drop in mortgage applications reported by the Mortgage Bankers Association for purchase loan applications confirm implies that new Home Sales may be overstated. Wait for the revised New Home data.
4) Lastly, the following email comes to us via a Lennar sales person — note that these homes are being sold, with add-ons, at greatly reduced prices, and in some cases, at a loss (click for email)