Fear & Greed Index

Tuesday, October 09, 2007 | 11:30 AM

James Montier's was the Global Equity Strategist of Dresdner Kleinwort Wasserstein. (He will retains the same title of  global equity strategist at Societe Generale) He developed a "Fear & Greed Index."

He describes F&G as "a risk adjusted price momentum measure between global equities and global bonds. In the past it has served as a powerful contrarian indicator at a 12 month time horizon."

What is it showing right now?

Fear & Greed Index
click for larger graph


courtesy of James Montier

As to the history of this indicator:

"I've found that when the F&G is above the upper limit the returns on equities over cash are a meager 2% per annum, but when F&G is below -2 then the returns over cash are more like 14% per annum over the next 12 months.

Right now it tells us that neither of these two extremes is true. I never try to forecast where the F&G is going, but rather use it as a measure of what my friend John Hussman calls market climate."

James now blogs at behaviouralinvesting.blogspot.com.

Tuesday, October 09, 2007 | 11:30 AM | Permalink | Comments (13) | TrackBack (0)
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Shouldn't it be "The end is nigh," as opposed to "neigh?" Or are ponies now mixing it up with the bulls and bears?

Posted by: Florida | Oct 9, 2007 11:47:19 AM

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