Floyd Norris of NYT on the Past Decade in Stocks

[haha]

http://www.nytimes.com/2010/12/25/business/25charts.html?_r=1&ref=floydnorris

How to interpret this is up to each of us. I profess faith in valuation, which is a largely outdated theory and methodology, so any comments from me would likely not be helpful.

Ha

 

[M Paquette]

http://www.nytimes.com/2010/12/25/business/25charts.html?_r=1&ref=floydnorris

How to interpret this is up to each of us. I profess faith in valuation, which is a largely outdated theory and methodology, so any comments from me would likely not be helpful.

Interesting article. Thanks.

I noticed other references to this long term move out of US stocks over the past year, and thought it was an interesting trend. The thing was, it appeared that folks were moving into developing market funds, which couldn't really absorb much investment without getting - well - bubbly. So, I stayed away and did nothing. I'm really good at doing that.

 

[clifp]

http://www.nytimes.com/2010/12/25/business/25charts.html?_r=1&ref=floydnorris

How to interpret this is up to each of us. I profess faith in valuation, which is a largely outdated theory and methodology, so any comments from me would likely not be helpful.

Ha

LOL.

It maybe an outdated theory, but running with the herd is an easy way to get trampled to death. Eventually the herd will discover your pasture and come rushing over when somebody tells them your grass is greener.

How would you assess the overall valuation of the market?

 

[HFWR]

http://www.nytimes.com/2010/12/25/business/25charts.html?_r=1&ref=floydnorris

How to interpret this is up to each of us. I profess faith in valuation, which is a largely outdated theory and methodology, so any comments from me would likely not be helpful.

Ha

Buy high, sell low.

 

[Midpack]

Interesting read thanks. I think it's a little early to draw the conclusion in the last sentence, but it sells (virtual) newspapers. What seems different this time is the substantial role US financial institutions themselves played in fueling and worsening this recession, and it's been the worst since the Great Depression. With that in mind, IMHO it's no wonder that the reaction this time to US markets has been more strongly negative.

The damage was severe but I'm not willing to write off US markets just yet, time will tell...

The stock market collapse in 2008 and early 2009 appears to have inflicted far more psychological damage — damage that may have been intensified by the collapse of home values [and the US financial institutions role in this recession] and the deep recession that hit the country, and by the fact that many stocks had not recovered the highs they had reached in 2000. For perhaps the first time since the late 1970s, many Americans seem to have become pessimistic about the future of their country.

In some ways, the current mood is reminiscent of the one that prevailed then. In 1979, Business Week had a cover article on the “Death of Equities,” which it attributed in large part to rising inflation. By 1982, inflation had begun to fall, but the country was in a deep recession. That is when the great bull market of the 1980s began. Few investors seem confident that such a renewal of optimism is likely this time.

 

[NW-Bound]

An excerpt from the OP's quoted article follows.

The accompanying charts show that investors took out $81 billion from such funds so far this year, significantly more than they took out in 2009 but well below the withdrawals of more than $150 billion in 2008, the year that Lehman Brothers failed.​

I wonder if the data obtained by Floyd Norris is up-to-date, even though his article was dated 12/24/2010. It is because I happened to spot the following paragraph in another Web article that stated that buyers have come back.

After the worst decade for stocks in a generation, things are turning around... demand for stocks ... will continue to drive equity prices higher and ultimately reignite investor interest in 2011.

In fact, this may already be happening: The fund flow experts at EPFR Global note that in five market days that ended Dec. 15, bond funds posted their biggest outflow since October 2008, while equity funds took in more than $10 billion for the second such period running. The shift from bonds to equities is accelerating as the economy strengthens and the epic bull market picks up steam.​

How do we reconcile the difference between the two articles? Note that one talks about the cumulative outflow of money from US stock funds through the year, while the second talked about the recent inflow during only one week in mid December. I also looked to see if the second article mentioned that the inflow was specifically to US stock funds and not foreign equities, but failed to settle that ambiguity.

 

[LOL!]

Actually you don't have to leave the same NY Times landing page to get an article that has the opposite content. Mr. Norris's colleague Mr. Lim wrote this: http://www.nytimes.com/2010/12/26/your-money/26fund.html

NOW that the market has risen, investors are becoming optimistic again about stocks.

 

[NW-Bound]

Mr. Lim's article says that "The American Association of Individual Investors, for example, reports that most investors now describe themselves as bullish, versus just 20 percent in July."

But he did not quantify the word "most". So, I looked up the AAII Web site, and found that 63.3% are bullish on 12/22/2010, up 13% from the week before.

OK, so they are bullish, but have they bought in yet? According to the money flow that was reported, apparently not all of them are in.

Heh heh heh... Being 76% in equities right now, some time next year, I will cash out some, and take my marbles home.

 

[dex]

Mr. Lim's article says that "The American Association of Individual Investors, for example, reports that most investors now describe themselves as bullish, versus just 20 percent in July."

But he did not quantify the word "most". So, I looked up the AAII Web site, and found that 63.3% are bullish on 12/22/2010, up 13% from the week before.

MarketGauge by DataView, LLC

The current AAII numbers give a ratio of 79% - a contrary indicator

http://tal.marketgauge.com/dvMGPro/charts/charts.asp?chart=MFCASH

 

[NW-Bound]

I just looked at the plot of AAII investor's sentiment. Wow! It is such a "noisy" signal, it looks useless to me. Well, so much for that theory...

 

[dex]

http://blogs.decisionpoint.com/chart_spotlight/2010/12/sentiment-is-very-bullish.html

Bottom Line: An excess of bullish sentiment is a caution sign and should cause concern because such sentiment peaks are often followed by price corrections, if not bull market tops; however, we do not use sentiment as a timing tool, just a indicator to help paint a picture of the market environment. So far we have no indication from our trend-following models that there are major problems ahead.

Crosscurrents December 2010

 

[LOL!]

I don't think anyone is bullish on European stocks particularly Euro bank stocks. Therefore, sell all your US equities and buy large-cap European stocks. You should do alright.

Or not.

 

[MasterBlaster]

I like the contrarian indicator that the herd is moving out od US stocks. The herd is often wrong.

My personal projection is modestly bullish for US stocks, given the S&P500 has a (trailing) PE of 18.05 or so and a projected (leading) PE of maybe 14.5 or so. I conclude that there just may be a modest rise in S&P yet to come for the next year. Especially considering the interest rate environment.

I wouldn't bet the farm though.