Coming Ka Event: Real or Nominal?

[FRED]

Re: Coming Ka Event: Real or Nominal?

That reference doesn't answer the question. Who is the public and who really knows what the public is doing.

Zoog, perhaps I am different, but I never took a penny out of my house loan to invest in stock market equities. If people are setting on cash in their investment accounts because they have been fearful of a market collapse, there could be who knows how much money that could go into things that might move the indices. EJ has cash I think, and I know I do. EJ's cash might move the market, but mine wouldn't be enough to produce a gnat's fart. But I don't who it is that writes commentary on web or MSM that knows how much cash I have or that anyone else has.

EJ's cash can't move the market, but the private equity put sure can.

[Jim Nickerson]

Re: Coming Ka Event: Real or Nominal?

Another thing Russell apparently thinks is that the "public" has not been in the market, and when the "public" does get in, that will boost it even more. Now I don't know how anyone assesses just who the "public" is, or how anyone assesses how much whoever is the "public" is in or out of the markets. I don't know whether such comments are idle speculation, or if they have some basis.

Fred,

But Cramer and that video in no way address the assertion that the "public" hasn't been in this market.

Seriously, does anyone know how "pundits," "gurus" base statements on what the "public" is doing?

[FRED]

Re: Coming Ka Event: Real or Nominal?

Fred,

But Cramer and that video in no way address the assertion that the "public" hasn't been in this market.

Seriously, does anyone know how "pundits," "gurus" base statements on what the "public" is doing?

That's not exactly an interview, is it? What is Cramer saying? Remember him from the dot com days? Same game, different players. Not VCs and investment banks, PE firms and investment banks. Not stock in dot coms and telcos but debt in anything that moves. Over 1,000 deals last year alone. He's asking, want to bet against PE because of some "negative" WSJ columnist? Was smart to bet with them 1996 - 1999, no so smart starting in Q2 2000. You can count on JJ to tell you to stay in until the Fat Lady sings.

[Jim Nickerson]

Re: Coming Ka Event: Real or Nominal?

After thinking a bit, I'll offer some sort of an answer to who is the "public."

American Association of Individual Investors, of which I am not a member and I know nothing of its constituency or how many participate in the polls that result in its BULL, BEAR, Neutral data as published in Barron's.

In the week after the equity markets topped in May 2006, the AAII data were 54.9% Bulls, 27.5% Bears, and 17.7% Neutral.

Bulls got down to 23.9% for week ending 7/21/06, Bears peaked at 57.8%

As recently as 5/4/07 Bulls were 28.6%, Bears, 54.3%.

7/13/07 Bulls 43.6%, Bears 30%, Neutral 26.4%

In the 10 weeks since 5/4/07 Bulls have averaged 40%, and Bears have averaged 38.2%, Neutral averaged 21.9%. Someone I read recently in looking at such sentiment indicators suggested counting Bears as the number reported plus 1/2 of the those Neutral. I know of nothing that suggests that is more valid than not doing it. Nevertheless, I think these numbers suggest there is no vigorous bullishness among the AAII members polled.

And I am not going to the trouble to put in Investors Intelligence data and Consensus Bulls data, but as the markets have moved to record highs, there has not been accompanying high numbers in Bullishness. Such restraint in bullishness could represent wisdom.

Russell may be correct in his assertion that the "public" is not heavily into the US markets, or at least has something that could argue for his assessment. I could write and ask him, but I doubt I'd get a reply.

[zoog]

Re: Where Are the Retail Investors ?

perhaps I am different

Just the fact that you are here at iTulip guarantees you're "different" :p

You're right, it doesn't really answer the question, just presents a possible general reason why the public might not be significantly in the market, if that is indeed the case.

Here's a Marketwatch article that I was hoping would give some concrete info about how much the public is investing, via online brokers. But there is only this one vague statement.

"More retail investors are jumping back into the stock market, but they're not trading as much as in the past. So online brokers are trying to dress themselves up with a broader suite of financial services," said Seth Dadds, an analyst at GARP Research & Securities Co.

Meh.

Ok, how about this approach. This guy uses Alexa to see the web traffic of online brokerages, then puts together a chart.

Check the graph(s) in the article, seems to be a general decline since early 2006. The graph only goes into May (when the article was written), so I went to Alexa and ran these sites for more current data. More of the same, although a fairly sizable spike up recently.


Sorry the graph doesn't show what sites. Blue is scottrade.com, red is tdameritrade.com, green is etrade.com

[Jim Nickerson]

Re: Where Are the Retail Investors ?

Just the fact that you are here at iTulip guarantees you're "different" :p

You're right, it doesn't really answer the question, just presents a possible general reason why the public might not be significantly in the market, if that is indeed the case.

Here's a Marketwatch article that I was hoping would give some concrete info about how much the public is investing, via online brokers. But there is only this one vague statement.

Meh.

Ok, how about this approach. This guy uses Alexa to see the web traffic of online brokerages, then puts together a chart.

Check the graph(s) in the article, seems to be a general decline since early 2006. The graph only goes into May (when the article was written), so I went to Alexa and ran these sites for more current data. More of the same, although a fairly sizable spike up recently.


Sorry the graph doesn't show what sites. Blue is scottrade.com, red is tdameritrade.com, green is etrade.com

Zoog,

That's a nice find, if the data are in fact indicative of what the "public" might be doing. It certainly does not suggest that whoever are those in the graphs are trading a lot.

[zoog]

Re: Where Are the Retail Investors ?

Here's a longer timeframe (the most it would give me) and I added Charles Schwab.

[Jim Nickerson]

Re: Coming Ka Event: Real or Nominal?

Good, Zoog.

It certainly does not look as if there is significant activity that one might expect at a market top. Looks more like a market bottom, if anyone can believe that!

[zoog]

Re: Coming Ka Event: Real or Nominal?

For my own amusement, I overlaid the S&P 500 (vertically scaled to fit). I'm not quite sure what to make of it. A curious divergence.

[Jim Nickerson]

Re: Coming Ka Event: Real or Nominal?

Again, nice work, Zoog.

It might not be curious, the current divergence between what I take to be the amount of trading activity (that assumes the fellow's methods are valid) and the upward market action, if the market is about to take off from where it is presently. Such a consideration is nearly impossible to consider plausible if one is bearishly oriented--which I have been all the past year as the markets have gone skyward.

With a lot of trepidation, I have become bullish right now, now whether that lasts til 9:30EDT tomorrow remains to be seen.

[zoog]

Re: Coming Ka Event: Real or Nominal?

Thanks Jim.

I can start to imagine a scenario where this apparent decline in public interest bottoms out and starts to climb back up again, building on top of the rise in the market we have already seen.

You and some others here have made some cautious statements in recent weeks about bullish possibilities. I too have expected the economy to tank "any day now" for some time, but am now wondering if, Q4 recession or not, and with the likely possibility of a correction, the stock market might continue to go up for a while. It at least causes me to pause in consideration of the types of investments I might make in the months to come.

[jk]

Re: Coming Ka Event: Real or Nominal?

EJ,

I guess you kinda know me enough to appreciate I am no whiz in comprehending a lot of this stuff. I don't know what Richard Russell thinks he knows in his heart, but I interpret what he is saying about there coming a "third phase" of the bull market, which I guess dates from at least 1981-82, or even some I believe 1974, with further appreciation in equities because of the massive liquidity which he believes or knows exists. I don't recall that he has argued there are no risks in any markets. I interpret his bullishness being based on his evaluation of a lot of markets from a technical perspective. He has not to my recollection mentioned anything about there being values in anything especially except precious metals on which he has been steadfastly bullish.

It seems to me he is saying, "To hell with fundamentals, the action of the markets say they are going to go up." Perhaps other subscribers to his service will interpret all this differently.

I am not saying he's correct and you are not. I absolutely do not know who is correct.

Another thing Russell apparently thinks is that the "public" has not been in the market, and when the "public" does get in, that will boost it even more. Now I don't know how anyone assesses just who the "public" is, or how anyone assesses how much whoever is the "public" is in or out of the markets. I don't know whether such comments are idle speculation, or if they have some basis.

i agree with your reading of russell, jim. he's been very explicit in saying there are no values in the market. he says we're near the start of a 3rd, speculative, phase of the long bull market back to '82. he says be in oil and precious metals and dividend paying utilities, but he's cautious about anything else. he's at times said we could have a correction and then really kick off on this 3rd leg up. [1st leg- 82 to 87?, 2nd 88-2000, 3rd started in '03? or 1st- 82-2000, 2nd- '03-06, 3rd starting in 07? trying to figure out his count is like trying to do elliot waves - beyond me]

the 3rd phase would be characterized by public involvement, involvement with the market like in the late 90's. instead of talking about real estate, people would be talking about the stock market again. in recent years the headlines, the magazine covers, have been about real estate- the boom and then the bust. where is the PUBLIC, msm hoopla about the market?

maybe the housing bust has to play out first, just like the stock market had to tank before people really focussed on housing. this would fit with my "1997 ?!" thesis outlined in another thread - a crisis of severity similar to 1997-8 followed by a big, speculative leg up, sucking [or suckering] in the general public once again.

the crisis provides the ka. the rescue provides the poom.

as to whether the ka is [merely] real or nominal as well, my vote is nominal as well. if credit spreads widen markedly and a lot of bonds and credit derivatives are busted, there will be a major move away from risk assets. carry trades will unwind. this should favor the dollar [temporarily] and the yen. cash will become more valuable vis a vis financial assets, and likely against commodities as well. but it's hard to predict whether enough market participants will anticipate the rescue and so keep a bid under oil, gold, etc. similarly, emerging markets should sell off, but might catch a bid from people anticipating the rescue and the resumption of decline by the dollar.

[c1ue]

Re: Coming Ka Event: Real or Nominal?

Another possible wrinkle to the housing saga is this:

With the MBS/CDO Ponzi scheme starting to unravel - the result will be a higher stock market.

How much higher? Take the money that various institutions stuck into MBS/CDO types of investments, subtract 10% overall losses, then insert into the stock market.

Dow 15000!

Then the dollar collapses :eek:

In this scenario - I would envision energy actually staying about even with more than some chance of a minor price reduction. The reduction of credit to hedge funds and subsequent loss of financial firepower will offset any institutional rebalance.

This is because while energy still seems a safe growth trend in terms of demand vs. supply, I actually would lean toward an at best even, more likely somewhat lower pricing range.

Though BRIC's energy demands are growing and supplies are even to declining, the existing price level is already high enough that moderating effects are starting to be felt. The pricing we have now I suspect is more due to tons of money being bet on a "sure thing" rather than a secular change of the magnitude being seen.

While certainly oil prices for example are still lower than their 70's peaks in inflation adjusted terms, don't forget that those levels caused an economic standstill.

Prices went from $2 to $10/barrel from 1973 to 1974, then from $13 to $32 from 1979 to 1981.

In comparison, we've gone from $30/barrel in 2005 to $56 in 2007.

All data from http://www.eia.doe.gov/emeu/aer/txt/ptb1107.html

Note the year numbers are as of January 1 of the year in question.

Even using inflation adjusted terms - the inflation adjusted price of oil in 1981 in 2007 dollars would yield something in the order of $73/barrel.

Right where we're at.

I am investigating further to see if this contrarian feeling has basis or is just my subconscious being ornery.

[Jim Nickerson]

Re: Coming Ka Event: Real or Nominal?

Another possible wrinkle to the housing saga is this:

With the MBS/CDO Ponzi scheme starting to unravel - the result will be a higher stock market.

How much higher? Take the money that various institutions stuck into MBS/CDO types of investments, subtract 10% overall losses, then insert into the stock market.

Dow 15000!

c1ue, I'm not savvy enough to follow your rationale here. If institutions/individuals lose money in the "MBS/CDO Ponzi scheme," how does the loss of money translate into a higher stock market?

If I lose 10% on something, how can I use that to reinvest in order to try to make more money?

Surely I am missing your point. Please help me.

[dbarberic]

Re: Coming Ka Event: Real or Nominal?

BTW... when I said "hard assets", I was referring to investments tied to hard assets (PM's, base metals, natural resource funds, etc.)