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.
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