Without question, Joe America, Mr. 401K, believes this latest rally signals economic recovery. I know this because everyone I talk to is worried about missing out of the return of the bull..... But what are some empirical ways of measuring sentiment among the masses (NOT among portfolio managers)....How can you measure how bullish/bearish Joe America feels about the stock market?
Check out the Yahoo message boards on various stocks and see what the percentage of "Strong Buys" there are. When they're extra emotional and bickering and arguing with each other, then you're probably near a top.
How can you predict though, with any certainty, when Joe America has already put as much money as he can into his 401K? Wouldn't, at that point, it be wise to go short? But how to know?
As an ex broker I received five calls last week from people asking me how they could get back into the market. Other brokers I know have seen the highest activity from retail traders in the last few years. While it is difficult to quantify how long this activity lasts, I personally watch the micro caps, to judge Joe public's interest. As long as these stocks are running on meaningless press releases, I will assume the public is still buying.
If it was so easy to know, we'd all be rich. We work in generalities and probabilities. The best you can do is be in the relative "zone" of a top or bottom.
What are the traditional ways of measuring Joe America's 'bullishness' ... Can anyone point me to the cold numbers that show that most Americans (not just portfolio managers) believe this rally.....
the best that I know if is the "shoe shine boy" effect. In the old days , they used to say that if the shoe shine boy was giving stock tips that was near the top of the market. its rare to see a shoe shine boy, but we see taxi drivers, hair dressers, etc.
It has never been Joe of America that decides : Joe of America and above all the fund managers follow the medias campain that isorchestrated. Just read cbsmarketwatch it's amazing how they just use the same slogan again "this time it's different" : "Massive spike in demand for stocks in the last two decades has permanently driven up the market's P/E ratios, rendering comparisons to historical norms based on pre-1980 data far less relevant." So to know Joe's of America sentiment it is easier to see when the medias campaign will cease.
Exactly my point when I posted "My Beef Against Contrarian Sentiment." AAII is crap. SHOW ME THE MONEY. Look at Rydex, COT, insider selling, etc. to determine true bullishness/bearishness. Mutual fund net flow was negative last year and slowly refunnelling back in just recently. But it really hasn't hit "speculative" levels... yet http://www.trimtabs.com/main/mffresearch.html http://www.ici.org/ And check out the new highs made by net long commercials in the spoos. http://www.cftc.gov Insider selling hit new highs last month. http://insider.thomsonfn.com/tfn/insider.asp?imodule=mktTearsheet
Updates: Commercials reduced long exposure in the SPOOS according to the latest COT report, but still remain net long. According to the Flow of Funds report, private penson funds are now flowing money INTO equities for the first time since 1997. That's a trillion dollar reservoir of cash still sitting on the sidelines. http://www.federalreserve.gov/releases/Z1/Current/z1.pdf Rydex Total Assets Update for Friday, June 13th, 2003: SHOW ME THE MONEY!