Sky-High Bullish Sentiment Suggests Caution is Warranted

Friday, February 10, 2012

Sky-High Bullish Sentiment Suggests Caution is Warranted

We have not yet tested these sentiment indicators for significance, but with stock market sentiment reflecting such extreme bullish confidence, one has to wonder who is left on the sidelines with cash ready to push this market higher.

S&P500 Price (top) and Mutual Fund Cash as a Percent of Total Assets (bottom)

Source: SentimentTrader

Source: SentimentTrader via Evilspeculator.com

Finally, it is the long term investor, he who most promotes the public interest, who will in practice come in for the most criticism, wherever investment funds are managed by committees, boards, or banks.

For it is the essence of his behaviour that he should be eccentric, unconventional, and rash in the eyes of average opinion.

If he is successful, that will only confirm the general belief in his rashness; and if in the short run he is unsuccessful, which is very likely, he will not receive much mercy.

Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.

John Maynard Keynes, 1936