B4 The Belll Frieday October 22
558 replies to this topic
Posted 25 October 2004 - 12:25 AM
Hussman has some interesting comments on the merits of judging sentiment indicators from a "relative" rather than absolute viewpoint:
Turning to current conditions, last week, according to Investors Intelligence, the percentage of bullish investment advisors surged to 58.9% while bears declined to a very low 22.1% (19% are in the “correction” camp).
Now, it's important to interpret advisory sentiment correctly. If you study this indicator closely, you'll find that the percentage of bullish investment advisors can be largely explained simply by past market performance over a variety of horizons. In general, strong markets have more bulls. Not surprising. Since we also know that there is no large or simple correlation between market movements in the recent past and market movements in the near future, it follows that the part of advisory sentiment explained by past movements is just plain uninformative as well.
So before looking at advisory sentiment, we have to factor out the portion that is explained simply by past market movements. Once we've done this, we are left with a much more informative indicator.
And that's a problem here. While 58.9% bulls is certainly not a figure that would be surprising if the market was enjoying substantial strength, it is completely out of line with the flatness of market action in recent months. On my own measures, I calculate that bullishness is currently about 17% higher than can be explained by past market performance.
Here's the implication. Historically, when that “excess bullishness” has been greater than 15%, the S&P 500 has produced an average annualized return of just 4.51% (specifically, that's a quarterly return annualized. In nearly all cases, valuations were substantially better than they are today). When excess bullishness was between –15% and +15%, the S&P 500 produced an average annualized return of 11.53%. Finally, when excess bullishness was –15% or less, meaning that there were far too few bulls after correcting for past market performance, the S&P 500 produced an average annualized return of 22.99%. Properly interpreted, sentiment does matter, and there are too many bulls here.
Posted 25 October 2004 - 12:27 AM
BG, B4, tanks for the word. I've had enough of cold-winters...
But how cold is "damn cold" ? I lived in Minnesota for 25 yrs...
Actually, I -would- appreciate a PM from those with current BC knowledge....mining-specific, or real-estate knowledge (rural land), or bargains on used heavy-equipment....or good contacts in those fields. I'm at the point of being ready to make calls, price things out, etc..
Same for NZ, altho I can't recall seeing a kiwi on the Stool so far...??
Posted 25 October 2004 - 06:51 AM
I am stunned with the lack of support on the dollar
Today should be historic
"If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them (around the banks), will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered." --- Thomas Jefferson
Posted 25 October 2004 - 07:05 AM
It's raining, it's pouring.........
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