"Big bottom, drives me out of my mind...how can I leave THIS behind?!"
(From Fleck's Rap today):
Comstock's Real McCoy: The good people at Comstock wrote a piece comparing a real bottom, 1974, with today's wannabe bottom. Have a look: "At the 1974 bottom, the S&P 500 sold at seven times earnings; 65% of the advisors in the Investor's Intelligence Survey were bearish; equity mutual fund cash was 11.7% of assets; and only 4% of stocks were above their 200-day average. Now, that's what a real downside extreme looks like. By way of contrast, the S&P 500 now sells at 43 times earnings; 35% of advisors are bearish; equity mutual fund cash is 5.3% of assets; and 60% of stocks are above their 200-day average."
The Comstock report continues: "On a more anecdotal level, now most investors have held on to their stocks and want to know when to buy more. The leading financial magazines feature the stocks to buy in the recovery. In 1974, investors fled the market in droves and swore they would never buy stocks again, while the periodicals ran articles saying that the market would not come back for a long time."
Name, Rank Speculation, and Series 7 Number: In any case, as I watched the events unfold last night, I just could not help being struck by the fact that it was such a beautiful example of all that is wrong, which is why I thought it worth expanding on this morning. It just goes to show you what rank speculation still exists among the "professional" community. The public is slowly getting disgusted, and so it is not sending the money to the mutual funds, but the people who have other people's money are still acting like the same drunks that they were during the mania. |
