Delusional Raging Bulls ?

Saturday, December 30, 2006 | 09:18 AM

This seems to be an ongoing sentiment debate we've been having for too long: How Bullish is the investor community really?  We've looked at this repeatedly (here and here most recently) over the past few months.

In Sore Winners, Barron's Alan Abelson answers the quesion with one word: Very:

"What strikes us about the current investment scene is how defensive, even delusional, the raging bulls are. And despite rolling in the long green by grace of the big market year, what a bunch of sore winners they are, insistent that everyone else is bearish and only they, brave souls, have the courage to be optimistic.

What hokum! For the fact is everyone's bearish except the mutual funds (whose motto is "cash is trash") and the hedge funds and the private equity funds, traders of every stripe including the racy types who trade futures and options (the Market Vane and Consensus Index surveys: both 70% or higher bullish), Joe Doaks and Jane Q. Public, investment advisers (Investors Intelligence: 56.5% bulls, 19.6% bears) and brokerage house strategists (for whom "sell" is a four-letter word). Did we leave out anyone?-oh yes, and the occasional tourist from Mars.

If everybody's so darn bearish, pray tell, who has been buying stocks like there's no tomorrow the past couple of months? Or are they a new breed of masochistic bears that gets their kicks from buying stocks because they just know the market is doomed to tank?

All of which gives us a strong sensation of déjà vu and, more particularly, why this glorious new year of 2007 seems so much like the not-so-glorious year of 2000. As we remember, 2000 began amid enormous euphoria, with the stock market headed for the moon. While the rationalizations at the time from the good-cheer incorrigibles of why the market was neither pricey or risky differed from the current versions of why the market is, if anything, undervalued, the reasoning is as flawed now as it was then.

As we also remember, 2000 ended in tears and tears that kept flowing for a long couple of years. So keep a generous store of hankies at the ready and hope the denouement to the current manic mood doesn't do quite as much damage to your psyches, let alone your pocketbooks. We were about to say, Happy New Year!, but maybe we'll wait for a more propitious juxtaposition to do so."

That first paragraph is a keeper . . . Say whay you might about Abelson -- the boy can sure write.


Sore Winners

Saturday, December 30, 2006 | 09:18 AM | Permalink | Comments (25) | TrackBack (1) add to | digg digg this! | technorati add to technorati | email email this post



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» Comment spam? from Wcw
Oddly, this one set off Mr. Ritholtz's comment spam detectors. Oh, well: here it is, in response to the substance and comments at the original post. In re dividends, the quick answer is: sorry, no. These days corporations return cash to sharehold [Read More]

Tracked on Dec 30, 2006 12:40:44 PM


Richard Russell made a good point in Fridays comments on market valuations The price to dividend ratio in 1929 was 35. In Aug of 87 it was a hefty 38. Currently the bulls would have everyone believe that the market is very undervalued. So where is the price to dividend ratio now? drumroll please...54...Tada. Earnings can be manipulated by accountants but dividends are what they are, they can't be manipulated. The market undervalued? I think not. Overvalued markets are not good long term investments. I don't think very many people learned their lesson in 2000.

Posted by: Gary | Dec 30, 2006 10:33:01 AM

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