Not that we need another confirmation that the stock market is out of touch with reality, but since you have asked……the number of retail trades is through the roof and hitting all time highs. This is synonymous with market tops. Unfortunately, this enthusiasm must be crashed out of the market before the next bull market begins. In other words, grab your chair before the music stops playing.
CNBC Writes: Smart Money: Smart money? Looks like it’s mom and pop
For the most recent leg of the rally, it seems like the so-called smart money may not be so smart after all.
If that’s true, the smart money has been losing.
Employing even more conventional wisdom, that might suggest the market is forming a top and ready to fall, as retail investors are often thought of as the last ones to a rally.
That thinking, though, is getting challenged.
There’s no doubt the retail investor has warmed up to the market in 2013 after sitting out much of the gains since the March 2009 lows. The mom-and-pop crowd ripped just short of $300 billion out of mutual funds from the 2009 low point through the end of 2012 even as the market gained more than 110 percent during the span.
As I have mentioned in my previous posts, the overall BULLISH psychological backdrop is now at the extreme and flashing warning signs.
Various metrics aside, I see very few bears. Even people who used to be bears and now bulls. All popular media is overwhelmingly BULLISH. Even if the article mentions “a possible drop” such argument is immediately counter attacked by stating something to the tune of “If the market drops it would be a wonderful buying opportunity to add more stocks”.
The article above is no different. It clearly illustrates how bullish everyone is. It’s a well known fact that Retail investors are the last ones on/off and as such could not be considered as “smart money”. Over 200 years of market data teaches us that. Yet, somehow the article twists it to be so. Simply put, neither the market nor investors can do wrong in this market.
Will this continue? I do remember seeing similar type of prevailing BULLISH psychology before, at 2000 and 2007 tops. We all know how that ended.
Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!
The Secret Behind This Stock Market Run Up
Investors are pouring more money into stock mutual funds in the U.S. than they have in 13 years, attracted by a market near record highs and stung by bond losses that would deepen if interest rates keep rising.
“The timing of retail investors tends to be terrible,” said Jonathan Pond, an independent financial adviser in Newton, Massachusetts, who oversees $200 million. The deposits may be a contrarian indicator of a market near a top, he said.
Jeremy Grantham, chief investment strategist at Boston-based money manager Grantham Mayo Van Otterloo & Co., told clients in a letter this week, “We will have the third in the series of serious market busts since 1999.” BlackRock Inc. Chief Executive Officer Laurence D. Fink said this month that stocks may decline as much as 15 percent because of political risks in China, Japan, France and the U.S.
As the melt up in the stock market continues, retail investors are the last ones to join the party. As always. As the article indicates, last time we had similar inflows was at the end of 1999 and early 2000 or right before the tech collapse and the subsequent recession.
I would go even further and suggest that today’s investor psychological backdrop is identical to that of 2000 top. For example, even though multiple high performing investors did spot the technology bubble and have tried to warn the others, for the most part they were completely ignored until it was too late. It was the “NEW” economy the old guard did not understand. Today’s environment is identical, except one fact. Instead of it being the NEW economy, today most markets participants believe that the FED can control the economy and its interest rates. That is of course a mirage that they will pay for dearly. Overall, the bullish sentiment is off the charts. As always, retail investors will lose the most as soon as the bear market kicks in.
As I have stated so many times before, the bear market will start in March of 2014 and will take 3 years to complete. While it will not be a violent move to the downside, it will shave off about 30-50% from today’s market prices over the next few years. You have been warned.
Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!
Investors are pouring more money into stock mutual funds in the U.S. than they have in 13 years, attracted by a market near record highs and stung by bond losses that would deepen if interest rates keep rising.
“The timing of retail investors tends to be terrible,” said Jonathan Pond, an independent financial adviser in Newton, Massachusetts, who oversees $200 million. The deposits may be a contrarian indicator of a market near a top, he said.
Jeremy Grantham, chief investment strategist at Boston-based money manager Grantham Mayo Van Otterloo & Co., told clients in a letter this week, “We will have the third in the series of serious market busts since 1999.” BlackRock Inc. Chief Executive Officer Laurence D. Fink said this month that stocks may decline as much as 15 percent because of political risks in China, Japan, France and the U.S.
As the melt up in the stock market continues, retail investors are the last ones to join the party. As always. As the article indicates, last time we had similar inflows was at the end of 1999 and early 2000 or right before the tech collapse and the subsequent recession.
I would go even further and suggest that today’s investor psychological backdrop is identical to that of 2000 top. For example, even though multiple high performing investors did spot the technology bubble and have tried to warn the others, for the most part they were completely ignored until it was too late. It was the “NEW” economy the old guard did not understand. Today’s environment is identical, except one fact. Instead of it being the NEW economy, today most markets participants believe that the FED can control the economy and its interest rates. That is of course a mirage that they will pay for dearly. Overall, the bullish sentiment is off the charts. As always, retail investors will lose the most as soon as the bear market kicks in.
As I have stated so many times before, the bear market will start in March of 2014 and will take 3 years to complete. While it will not be a violent move to the downside, it will shave off about 30-50% from today’s market prices over the next few years. You have been warned.
Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!
CNBC Writes: Smart Money: Smart money? Looks like it’s mom and pop
For the most recent leg of the rally, it seems like the so-called smart money may not be so smart after all.
If that’s true, the smart money has been losing.
Employing even more conventional wisdom, that might suggest the market is forming a top and ready to fall, as retail investors are often thought of as the last ones to a rally.
That thinking, though, is getting challenged.
There’s no doubt the retail investor has warmed up to the market in 2013 after sitting out much of the gains since the March 2009 lows. The mom-and-pop crowd ripped just short of $300 billion out of mutual funds from the 2009 low point through the end of 2012 even as the market gained more than 110 percent during the span.
As I have mentioned in my previous posts, the overall BULLISH psychological backdrop is now at the extreme and flashing warning signs.
Various metrics aside, I see very few bears. Even people who used to be bears and now bulls. All popular media is overwhelmingly BULLISH. Even if the article mentions “a possible drop” such argument is immediately counter attacked by stating something to the tune of “If the market drops it would be a wonderful buying opportunity to add more stocks”.
The article above is no different. It clearly illustrates how bullish everyone is. It’s a well known fact that Retail investors are the last ones on/off and as such could not be considered as “smart money”. Over 200 years of market data teaches us that. Yet, somehow the article twists it to be so. Simply put, neither the market nor investors can do wrong in this market.
Will this continue? I do remember seeing similar type of prevailing BULLISH psychology before, at 2000 and 2007 tops. We all know how that ended.
Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!