Barron's Big Money Poll Bullish Consensus Reaches a Record High

This week's Barron's magazine contains the latest Barron's 'big money' poll. Evidently they interviewed a herd – there was once again near unanimity on a number of markets. The bullish consensus on US stocks clocked in at a new all time high for the Barron's poll with 74% of those surveyed declaring themselves 'bullish or very bullish on US stocks'. Only 7% are pessimistic. By contrast, only 45% were bullish in the spring of 1999 and 54% in the fall of 1999. One third of those taking part in the survey expect the DJIA to reach 16,000 points within about one year, 25% think it will go higher than that.

That is just for the US stock market, mind. Apparently there is a separate category asking about 'stocks in general', as well as about real estate. This has to be seen to be believed:

 

“Even so, the managers aren't just bullish on U.S. stocks, but on equities generally. Some call it the TINA trade, for "there is no alternative" to stocks in a slow-growth, ultra-low interest rate world. Eighty-six percent of poll respondents are bullish on stocks for the next 12 months, and a whopping 94% like what they see for the next five years. Real estate has similar approval ratings.

 

(emphasis added)

Nothing can go wrong! Maybe we should type that in all caps, so that it goes better with the “94% that like what they see for the next five years”. An appropriate cartoon accompanied this unabashed show of giddiness.

 


barron'sThe 'big money' is up to its eyebrows in stocks and giddy like never before …

 


Not surprisingly, the bearish consensus on treasury bonds was once again the standout of the poll (for the umpteenth time in a row, bonds proved to be the most hated asset class by far) with 89% bearish on bonds and a full 92% declaring bonds 'overvalued'. Gold bulls can finally breathe a small sigh of relief: In October last year, 69% of money managers declared themselves bullish on gold, but this has now been cut down to just 35%, with 65% bearish and only 11% believing it will be the best performing asset class over the next year. Japan's stock market has found new converts – in October of last year, only 24% were bullish on Japan, right on the eve of the biggest rally since 2005. Now 62% are bullish on Japan, but only 13% think it will be the 'best performing market' over the next six to 12 months.

 


 

big-money-poll-2

The details: 86% are bullish on stocks and real estate, only 11% are bullish on treasury bonds. Cash is the second most hated asset, gold is in third place, with 65% bears.

 


 

Our conclusion would be that it is probably best hold cash, treasury bonds and gold. Whenever this poll reveals extremes of opinion, it is usually a good time to look the other way.

 

US Stock Market Technical Conditions

We want to show a few charts briefly illustrating the technical backdrop to all this euphoria. Before we get to that, a few words regarding corporate earnings, which many survey participants cited as a major reason to remain bullish in what is, in John Hussman's words, a market suffering from “overvalued, overbought, overbullish” syndrome. In the third quarter of 2012, SPX earnings growth was actually negative; in the fourth quarter, a small gain was squeezed out. The first quarter of 2013 seems very likely to once again produce negative earnings growth. Of course many companies were still 'beating expectations' in the second half of 2012, as they jumped over the much lowered bar of continually declining earnings estimates. A significant number of prominent companies have no longer managed this feat in the current earnings season. Not even IBM, the world champion in 'earnings management', was able to beat expectations this time. This is no wonder, as there are what some consider 'depression-like conditions' in the euro area (for several countries that is certainly an apt description), where for example car sales have just fallen to a 20 year low, with severe declines recorded in a number of countries, including Germany with – 10% (Portugal: – 47.4%, France – 20.7%, Italy – 16.9%, etc.).

However, not only is the fundamental picture not as convincing as the bulls seem to think (in an example of the 'the market writing the news' to quote Bill Fleckenstein), but there are also a number of negative technical developments. We hasten to add that previous dubious technical developments have proven meaningless so far, but that is obviously not an immutable condition.

 


 

SPX-daily

The SPX daily: RSI and MACD diverge from price for the second time in a row – click to enlarge.

 


 

RUT-SPX ratio

The Russell 2000/SPX ratio – small cap stocks are underperforming- click to enlarge.

 


 


NDX

The NDX and the NDX-SPX ratio (black line): big cap tech stocks are underperforming the SPX, and most recently the  NDX has peaked at a lower high versus a higher high in the SPX- click to enlarge.

 


 

The Barron's survey is not the only sentiment datum showing extreme bullish sentiment. Consider as an example the Hulbert Nasdaq sentiment index of stock market newsletter writers. Their recommended net long exposure was recently right back at a record high, which incidentally slightly exceeded the extreme seen at the March 2000 Nasdaq top.

 


 

Hulbert Nasdaq sentiment

Hulbert Nasdaq sentiment – just a few ticks off a record high- click to enlarge.

 


 

Since we have mentioned the Nikkei index above, it should be noted that its tendency to top out in March (which has quite a tradition) has been violated this year, as it is late April and it evidently still rising. However, the market continues to look severely overbought and ripe for a correction.

Obviously the BoJ's new 'pro inflation' mandate has helped inflate the Nikkei in anticipation, but that means ultimately that it is rising for the wrong reasons. It may also have merely lengthened the usual cycle (the rally did begin at the 'right' time). Still, from a practical perspective this means one has to continue to give the market the benefit of the doubt for now, especially if the peak of the current rally cycle continues to be pushed out further. As we have pointed out previously, that would be a change in character for this market.

Note however that a confluence of resistance levels is not too far from current levels. Moreover, there is a growing RSI-price divergence visible on the daily chart as well.

 


 

Nikkei

The Nikkei daily – a growing RSI-price divergence is in evidence- click to enlarge.

 


 

Nikkei-weekly

The Nikkei weekly – the red line indicates a strong level of lateral resistance. Note also that when the Nikkei became as overbought as currently on a weekly basis in the past, a sharp and swift correction soon ensued – click to enlarge.

 


 

Lastly, John Hussman also writes about the Barron's poll in his weekly missive, and has included the following chart as a reminder that magazine covers showing overconfident bulls in various stages of giddiness often represent a warning that the market is in dangerous territory. We should add that it isn't a bearish sign every time when Barron's features a bull on its cover. It is only remarkable in the current instance because of the poll results discussed above.

 


 

Hussman


Via John Hussman: Barron's covers near significant caveat emptor moments in recent market history- click to enlarge.

 


 

Conclusion:

To summarize all of the above: from a technical perspective it appears as though the recently begun short term correction is probably not yet over. The Barron's big money poll meanwhile suggests that there exists now significant medium to long term risk in the market.

With only 7% pessimists left, who is left to buy? One hope expressed by the fund managers interviewed was that the recent record inflows by individual investors into stock funds will continue and drive the market higher (in other words, they are in expectation of the arrival of greater fools). We believe this is a flawed theory, based on demographic considerations and the fact that many people have been worn out by the secular bear market's ups and downs. A market where performance and sentiment remain at odds with each other continues to be the US treasury bond market, which the 'big money' has hated with a passion for many years now. The pronounced bullish sentiment on gold that was still visible in late 2012 has been vaporized by the recent decline in the gold price. In our judgment, the 'big money' clearly suffers from what is known as 'recency bias'.

 

 

Charts and tables by: StockCharts, BigCharts, Sentimentrader, Barron's, John Hussman


 

 
 

Emigrate While You Can... Learn More

 
 

 
 

Dear Readers!

It is that time of the year again – our semi-annual funding drive begins today. Give us a little hand in offsetting the costs of running this blog, as advertising revenue alone is insufficient. You can help us reach our modest funding goal by donating either via paypal or bitcoin. Those of you who have made a ton of money based on some of the things we have said in these pages (we actually made a few good calls lately!), please feel free to up your donations accordingly (we are sorry if you have followed one of our bad calls. This is of course your own fault). Other than that, we can only repeat that donations to this site are apt to secure many benefits. These range from sound sleep, to children including you in their songs, to the potential of obtaining privileges in the afterlife (the latter cannot be guaranteed, but it seems highly likely). As always, we are greatly honored by your readership and hope that our special mixture of entertainment and education is adding a little value to your life!

   

Bitcoin address: 1DRkVzUmkGaz9xAP81us86zzxh5VMEhNke

   
 

Your comment:

You must be logged in to post a comment.

Most read in the last 20 days:

  • factoryA Striking Chart
      The Economy and the Stock Market As long time readers know, we are always paying close attention to the manufacturing sector, which is far more important to the US economy than is generally believed. In terms of gross output it is the largest sector of the economy, and it should of course be obvious that saving, investment and production are the only ways to create wealth.   What's left of the Brooklyn Domino Sugar Refinery. Photo credit: Paul Raphaelson   Contrary...
  • trump-putin-1024Trump and Putin Narrowly Escape Assassination Attempt
      The Gloves are Coming Off First a little bit of recent history. Readers are probably aware that some questions about the occasionally malfunctioning Deep State android... no, wait, we'll start again. Questions have recently been raised about the health of presidential candidate Hillary Clinton by various “alt-right” tinfoil hat-wearing conspiracy theorists, such as this one.   The monsters are normally hiding under Hillary's bed, but lately they have come out into the open...
  • historical-photos-pt9-pepsi-factory-baltimore-1956-aUS Economy - Curious Pattern in ISM Readings
      Head Fake Theory Confirmed? This is a brief update on our last overview of economic data. Although we briefly discussed employment as well, the overview was as usual mainly focused on manufacturing, which is the largest sector of the economy by gross output.   Pepsi factory in Baltimore, 1956 Photo via pinterest.com   Readers may recall that we have pointed out for some time that there was quite a large gap between the data reported in regional Fed manufacturing...
  • escobarA Convocation of Interventionists, Part 2
      Pleas for More Deficit Spending We continue with our Jackson Hole post mortem – including remarks that were made by economists and monetary bureaucrats shortly before and after the pow-wow and seem to be connected to the discussions there.   Assembled central planners (we're not sure if this picture was taken at the conference, but most of the people in it were there). Photo credit: Getty Images   We should preface the following with a Mises quote, as the...
  • swing-voterWhy the Fed Destroyed the Market Economy
      What Have You Done for Me Lately? Swing voters are a fickle bunch.  One election they vote Democrat.  The next they vote Republican. For they have no particular ideology or political philosophy to base their judgment upon.   The primacy of the wallet.   They don’t give a rip about questions of small government or big government.  Nor do they have any druthers about the welfare or warfare state. In effect, they really don’t care.  What’s important to the...
  • time-wastersHow is Real Wealth Created?
      An Abrupt Drop Let’s turn back to our regular beat: the U.S. economy and its capital markets. We’ve been warning that the Fed would never make any substantial increase to interest rates. Not willingly, at least.   Groping in the dark, Yellen-style   Each time Fed chief Janet Yellen opens her mouth, out comes a hint that more rate hikes might be coming. But each time, it turns out that the economy is not as robust as she had believed... and that a rate hike isn’t...
  • wallet-367975_960_720Janet Yellen’s Shame
      Playing Politics In honest capitalism, you do what you can to get other people to voluntarily give you money. This usually involves providing goods or services they think are worth the price. You may get a little wild and crazy from time to time, but you are always called to order by your customers.   In the market economy, consumers reign supreme. There is no such thing as a “lost” vote in the marketplace; every penny spent affects production. Mises noted: “Consumers...
  • warren-buffett-gold-coinGet Ready for a New Crisis – in Corporate Debt
      Imposter Dollar OUZILLY, France – We’re going back to basics here at the Diary. We’re getting everyone on the same page... learning together... connecting the dots... trying to figure out what is going on.   The new three dollar bill issued by the Apprehensive States of America.   We made a breakthrough when we identified the source of so many of today’s bizarre and grotesque trends. It’s the money – the new post-1971 dollar. This new dollar is green. You...
  • central bank HQs 2A Convocation of Interventionists – Part 1
      Modern Economics -  It's All About Central Planning We are hereby delivering a somewhat belated comment on the meeting of monetary central planners and their courtier economists at Jackson Hole. Luckily timing is not really an issue in this context.   Central bank headquarters: the Fed's Eccles building, the ECB's hideously expensive new tower in Frankfurt, and the BOJ's Tokyo HQ (judging from the people in the foreground, it may be a source of noxious fumes).   When...
  • silkroadHanjin Marooning in San Pedro Bay
      Global Trade Reversal Expansions and contractions in global trade have played out over long secular trends for thousands of years.  The Silk Road, for example, was established by the Han Dynasty of China in 130 BC, and allowed for continuous trade between East and West for nearly 1,600 years.  In addition to economic trade, the Silk Road was also a conduit for culture and knowledge among its network of civilizations.   A map of the main ancient Silk Road - click to...
  • SamuelsonJohn Maynard Keynes’ General Theory Eighty Years Later
      The “Scientific” Fig Leaf for Statism and Interventionism To the economic and political detriment of the Western world and those economies beyond which have adopted its precepts, 2016 marks the eightieth anniversary of the publication of one of, if not, the most influential economics books ever penned, John Maynard Keynes’ The General Theory of Employment, Interest and Money.   The mere fact that the book is lauded by TIME magazine on the cover should give everyone...
  • 4-ip-and-non-def-capital-goods-ordersThe Economy, the Stock Market and the Fed
      John Hussman on Recent Developments We always look forward to John Hussman's weekly missive on the markets. Some people say that he is a “permabear”, but we don't think that is a fair characterization. He is rightly wary of the stock market's historically extremely high valuation and the loose monetary policy driving the surge in asset prices.   The S&P 500 Index and the NYSE advance-decline line. Most market internals weakened steadily until early February 2016, but...

Austrian Theory and Investment

Support Acting Man

Own physical gold and silver outside a bank

Archive

j9TJzzN

350x200

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

 
Buy Silver Now!
 
Buy Gold Now!
 

Oilprice.com