I have mentioned several times recently that bullish sentiment is extreme. If anything, "extreme" seems like an understatement as noted in Bullish Sentiment: Turning into a Stampede?
One of his data points was a claim that Individual investors (the AAII sentiment survey) was "the most bullish in six years."
But did Mish look at the AAII poll?
That is high. But is it the most-bullish in six years as Mish quoted?
Uh no. Not even in the recent past, say much less the last six years. And what happened when sentiment was higher in December and January? The market went higher - at least for a little while.
Be careful reading the various blogs and news stories folks. Most of these statements are verifiable, but it's important to do it. It appears that the statement in question actually belongs to "Elliottwave", and Mish cited it, but it also appears that he didn't verify it first.
A pox on both their houses given that AAII publishes their sentiment numbers in convenient table form.
Sentiment is something to pay attention to, but as with all such statistics you have to apply a fair degree of skepticism to any analysis that simply says "this indicator says X, so do Y."
I do, incidentally, agree with Mish that this is not a good time to be buying stocks. My areas of concern are found in energy prices and the fact that I believe the federal budget "goose GDP games", along with The Fed's enabling of them, are running out of maneuvering room. Since budget cuts come directly from GDP and then on top of it we will see changes in international capital flows when Japan embarks on rebuilding, my view is that risk is higher here than we've seen at any other time in the last year.
The counter-balance that is often said is "well, what else would you buy if not stocks?" And that's the question that one has trouble answering, simply because valuations, no matter where you look, appear to be quite rich among your other options.
Where We Are, Where We're Heading (2013) - The annual 2013 Ticker
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