Monday, February 6, 2012

What If Stocks Continue to Move Higher?

Investors' Eyes Remain Fixed on the Past
If it's any consolation to Pats' fans who also happen to be investors, consider this snippet from CBS Sports:

I'll tell who likes the Giants' win most of all: Wall Street. When old NFL teams wins, meaning the NFC, it's bull market; when it's old AFL teams it's a bear market. That's not my opinion; it's based on something called the Super Bowl Indicator (SBI), and it's been correct 33 of 41 times.

So I guess we should be happy today.

But still:  If Welker just hangs onto that ball in the fourth quarter...



Back to reality:  Stocks continue to act well, despite a constant drumbeat of negative pronouncements from Wall Street and Europe.

The most recent theme is to hark back to last year, when stocks also started the year well but then moved sharply lower in the summer.  Yes, the argument goes, the market managed to eke out a positive return in 2011, but this year will be different.

Bloomberg carried an article this morning about the negative investor sentiment that still is very much evident despite the gains from stocks so far this year.

Investors pulled money from mutual funds that buy U.S. stocks for a fifth year in 2011, the longest streak in data going back to 1984, according to the Investment Company Institute in Washington. Withdrawals were $135 billion last year, the second-highest total after 2008, the ICI said...

“The stock market has effectively doubled since the March ’09 low, and we’re still in redemption territory for equity funds,” Liz Ann Sonders, the New York-based chief investment strategist at Charles Schwab Corp., said in a Feb. 2 phone interview. Her firm has $1.7 trillion in client assets. “That’s never happened.”

There was a funny - albeit off-color - piece written by Joshua Brown at the blog
The Reformed Broker this weekend that should offer a wake-up call for those who continue to focus only on the downside risks of stocks.

Brown is obviously exaggerating for effect, but his frustration with the strategists that appear daily on CNBC is obvious. Here's an excerpt:

And these Chief Strategist clowns, don't even get me started.  The survivalist guys, the bunker guys?  Let me let you in on a little secret - they've ALWAYS been the losers.  They claim to be "realists" but really they're misanthropes who are unhappy and pray daily to see everyone else dragged down with them.  They haven't been right yet.  You've ignored them your whole life and you can go back to ignoring them right now....

 And worse than the losers are the haters, the glass-is-always-half-empty crowd.  "But it's not enough jobs added, and it doesn't matter because of the debt, and Iran, and Europe, and China, and oil prices..."  What makes these people so dangerous is that they are absolutely right on the details but dead-ass wrong on the consequences.  And they have no context....

Food for thought on a Monday morning.