Every Stock Mutual Fund Lost Money in 2008 But One
Here's another one of those bizarre stats of the year for you:
Out of the 11,585 U.S. and international stock mutual funds tracked by Morningstar Inc., 11,584 have lost money in 2008, according to fund data through Nov. 20.
Momentum Top & Bottom Signals
Mike Santoli mentions an interesting technical measures in his streetwise column this morning: Triple digit stock momentum at tops, and low priced S&P500 stocks at lows.
"LAST YEAR, WITH THE MARKET near what would prove its ultimate high, I noted a perverse pattern in which triple-digit- priced stocks were consistently outperforming other issues, a sign of momentum-chasing speculation (Streetwise, May 14, 2007).
VIX Slips Below 50
Who could have predicted that traders would be celebrating the decline of the Chicago Board Options Exchange’s volatility index below the 50 mark?
We saw the VIX peak late October, coincident with the worst of the credit freeze and market panic. The VIX closed yesterday at 47.76, down 11%, for the first close below 50 after an incredible run of 21 consecutive days above 50.
The VIX peaked late October, coincident with the worst of the credit freeze and market panic.
Volatility has begun to diminish as investors reduce their worry about the state of the markets, even as the outlook for the economy worsens.
One thing we learned: The prior measure for volatility "highs" around 30 are not reliable entry points for bad dislocations. They have in the past signaled sufficient panic that you could buy in, but that is a level that traders may no longer find much faith in.
Peter Boockvaar reminds us that the VIX has closed above 30 for 37 consecutive days, and may still surpass the period in 1998 during the Long-Term Capital Management debacle where it was above that mark for 50 days.
The current worldwide liquidity crisis may yet take a long time to stabilize . . . and I would expect the VIX to also take an equal amount of time to find a more moderate level.
Fear Returns to the Markets (September 18, 2008)
Chart of the Day: VIX versus SPX (June 23, 2008)
10 Year VIX versus SPX (June 24th, 2008)
Did October 2008 Panic Exceed the 1987 VIX Levels ?
In all of the end of month mayhem last week, you may have missed the above Bloomberg chart-of-the-day on Friday. It showed something that was rather fascinating: Option traders have been at a more elevated level of fear for a longer period of time than during the 1987 crash.
The comparison is one between short and sharp (1987) versus high and protracted (2008). Its between a brief peak and a prolonged elevation.
Here's the Ubiq-cerpt:™
"U.S. stock investors have been more fearful for longer than they were in the weeks before the October 1987 market crash, according to a gauge known as the old VIX.
The CHART OF THE DAY shows the closing values for this indicator, the Chicago Board Options Exchange S&P 100 Volatility Index, in the past two months (the white line) and the same period 21 years ago (the red line).
This year, the old VIX climbed from the start of September through Oct. 11, when it surpassed 100 in intraday trading for the first time since the month of the crash. Back in 1987, the index stayed below 30 until the Friday before stocks tumbled.
The indicator is derived from prices of options on the S&P 100, as its name suggests. The current version, introduced five years ago, uses S&P 500 options and includes more contracts in the calculations. Their readings tend to be similar. The VIX closed yesterday at 62.90."
Good stuff . . .
'Old VIX' Shows More Sustained Fear Than in 1987: Chart of Day
Bloomberg, October 31 2008
Consumer Confidence Plunges to Record Low
chart via FusionIQ, Bloomberg
The Conference Board reported Consumer Confidence Index for October hit a record low of 38.
(*Note: Interim low - market was already in a secular upswing.)
(#Note: Consumer confidence readings that were closest to the latest reading.)
Table via Mike Panzner
Another Buy In
We put some more money to work this morning into the mess -- another 5% -- while I was somewhere over North Carolina, on the way to Tampa. we are now down to 55% cash, from a peak of 80%.
As I noted on October 10, we "scale in over time, in 10% increments, and recognize that the bottoming process can take several months to several quarters to complete. Hence, slowly buying in is the key."
I would expect that another whoosh down will lead us to put another 5-10% to work. I was disappointed to see we didn't get the 1000 point down capitulation. That's probably to pat, and widely expected/hoped for.
Oh well, there's always Monday . . .
Marc Faber: "Extremely Oversold"
"We're extremely oversold at the present time,'' Faber said in an interview with Bloomberg Television. "The market is in a position to rebound.''
The Standard & Poor's 500 Index dropped 38 percent from its record 1,565.15 reached Oct. 9, 2007, as investors speculated more than $660 billion in bank losses will spur a recession. The ratio of stocks advancing versus those declining on the New York Stock Exchange fell to a 17-month low on Oct. 15.
Faber said he is holding gold, cash and short-term bonds because inflation will increase as the U.S. government lowers interest rates to stave off an economic slowdown. Gold climbed 5.8 percent from Sept. 11 through yesterday and yields on three- month Treasury bills fell 51 percent over the period.
Faber Says Stocks May Rally, Won't Reach Records
Eric Martin and Rhonda Schaffler
Bloomberg, Oct. 20 2008
My pal Paul Kedrosky over at Infectious Greed discusses "notable market bears recently turned bullish. Granted, not all the bears are of the perma- variant, and their bullishness is considerably more nuanced than the fevered pom-pom shaking you hear from the perma-bull side."
Jeremy Grantham (Quarterly letter)
Doug Kass (Real Money)
Barry Ritholtz (October 10)
To that I would add:
Warren Buffett (you don't amass $46 billion in cash if you are bullish)
Ned Davis (Barron's)
John Hussman (commentary)
Mike Panzner (over dinner last week, and just for a trade)
Todd Harrison, Minyanville.com
No sign of Peter Schiff, David Tice, Michael Panzner, etc., but that admittedly may require considerably more than a mere 40+% year-over-year decline, a few major banks and brokers going down, etc.
Feel free to add to the list in comments -- Bears who flipped bullish over the past few weeks . . .
Sentiment Update: Go Blue !
How is sentiment lately? It is insanely negative. I am going to give you three different factors -- anecdotal, data driven, and media.
1) For most of the past 2 years, I have invariably been the most bearish guy in the room. This has been true whether I was at a meeting or conference, on TV, in print, or simply out having dinner. The lone exception were anytime Nouriel Roubini was also present. Then I would be the 2nd most bearish person in the room.
Lately, I am the most bullish guy in the room -- and I have to tell you, that is just plum weird to me. This week, there were 4 separate occasions when I was in meetings, on TV, at a lunch, at a private dinner. Its very odd.
2) The October University of Michigan Confidence number is just shy of the lowest level since 1980. University of Michigan Consumer Confidence level is at levels not seen since the end of the 1970's bear market. (Hence, my "Blue" double entendre). The telephone survey is compiled last week and as late as yesterday. It certainly reflects much of the market action over the past 2 weeks.
That's right, we are as negative as anytime we have been over the entire course of the 1982-2000 Bull, or the start of the 2000-03 bear. Worse than the 1990 recesson, worse than LTCM or the Thai Baht crisis, worse than the tech and dot com crash, worse than 9/11.
That is some seriously bearish sentiment:
U. of Mich. Survey similar reading to 1970's Bear Market low level
chart courtesy of FusionIQ
I keep hearing people say (anecdotally) there isn't enough Bearish sentiment, but with equities nearly cut in half, and near 30 year lows at UoM Sentiment, this is just about as bearish as it gets. And that's bullish for equities.
3) On a media note, beyond the Soup lines on the cover of Time magazine, this weekend I have to Tivo "Fall of the Fat Cats" on CNN.
Programs of that sort are more anecdotal support for excessive Bearishness . . .
Barron's Magazine Cover . . .
Fascinating juxtaposition between the cover of this week's Barron's and the market action today: A bull, crying over the market, with the tissue box chart pointing downwards. (There were bullish articles inside, like this: America For Sale: Price Reduced)
That hit my inbox Saturday morning. Today, the Dow had its biggest single point gain ever: Dow Surges Nearly 1000 Points.
Pretty cool, no?
UPDATE: October 13, 2008 8:10pm
Speaking of contrary indicators:
The Washingtonpost.com has launched a video series, “Hard Times,” by Emmy Award-winning producer Travis Fox, that helps to translate how the financial crisis and market turmoil are affecting individuals across the country. The series is a reflection of the economic issues that will be a top priority for citizens voting in the presidential election.
Over the next couple of weeks, Fox will travel from California to D.C. talking with people in areas hardest-hit by home foreclosures, loss of retirement funds, unemployment, the rising price of food and gas and other economic challenges.
"Hard Times is meant to be a hard-hitting, poignant series focusing on the pain, suffering and dashed hopes of people brought about by failed economic policies on Wall Street -- and how this all may affect the outcome of an historic presidential contest," said Eric Pianin, Politics Editor at washingtonpost.com.