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Active Investment Managers Declare Record "Lack Of Confidence" In Their Outlook

Tyler Durden's picture


According to the latest poll of the National Association of Active Investment Managers,
even as an almost record number of respondents confirm their
bullishness (a contrarian indicator), an all time high confirm that
they are "not confident" in their outlook. This is a turning point for
bullish to bearish sentiment inversion, as can be seen in March of
2008, when a comparable confidence reading resulted in a major drop in
sentiment, which subsequently resulted in a Fall 2008 market doldrums
to put it lightly.

Chart courtesy of Sentiment Trader:

And an explanation of the data:

From the website of the National Association of Active Investment Managers:

NAAIM member firms who are active money managers are asked each week to provide a number which represents their overall equity exposure at the market close on a specific day of the week, currently Wednesdays. Responses can vary widely as indicated below. Responses are tallied and averaged to provide the average long (or short) position or all NAAIM managers, as a group.

Range of Responses:

200%   Leveraged Short
100%   Fully Short
0%      Cash or Hedged to Market Neutral
100%   Fully Invested
200%   Leveraged Long.

Data collection issues that may affect the statistical significance of this data include:

Use of a single, composite number for each adviser may not accurately represent the market view of a manager who has short term and long term strategies that are providing conflicting signals or a manager who uses both contra-trend and trend following strategies for different portfolios.

Investment Styles very widely among managers participating in this survey. They may include managers that trade very frequently and can switch long and short positions daily. Other managers stay fully invested at all times and only change allocations among market segments or sectors. Still others trade around core positions and only a portion of their portfolios change, but that portion could potentially go from long to short very quickly.

Sample size: Although the number of participating managers, known as NAAIM Trend Setters, is steadily growing the sample size is not large and therefore may be less reflective of actual market conditions.


This is a contrary indicator, meaning that excessive bullishness among managers is bearish for the market and vice-versa.

The history of this survey is relatively short, however currently we use a level of 80% to be representative of an excessive net long position and 20% to be excessively net short.

We also show a "confidence" in the lower panel of the chart which is taken from the standard deviation of survey responses.  This allows us to see how much variance there is among the managers - the less variance there is, the more unanimity of opinion, and ostensibly the stronger the signal.


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Fri, 10/09/2009 - 13:03 | 94159 Cognitive Dissonance
Cognitive Dissonance's picture

Can someone please tell me if I'm the stupid money or the smart money if I'm currently 50% invested?


Fri, 10/09/2009 - 14:22 | 94266 defender
defender's picture

The answer to your question can only be "Yes".

Sat, 10/10/2009 - 23:30 | 95640 john bougerel
john bougerel's picture


Fri, 10/09/2009 - 13:10 | 94165 Oso
Oso's picture

Bigger story today is the violent F-ing move in the yield curve.  why risk assets arent selling off is beyond me

Fri, 10/09/2009 - 13:28 | 94186 Cursive
Cursive's picture

I've got a theory that the MM's and bigger players haven't had enough time to offload their shares to the retail investors.  They are trying to hold it, but events outside of their control may ultimately force their hand.  One of the big players needs to panic and start selling.  What will spark that one player to start selling?  I don't even think they know.

Fri, 10/09/2009 - 13:33 | 94193 SDRII
SDRII's picture

Steeper curve is better for the banks can let the flattener happen

Fri, 10/09/2009 - 18:32 | 94692 deadhead
deadhead's picture

one of my favorite wall st adages....once the selling starts, he who panics first, wins.

Fri, 10/09/2009 - 13:12 | 94168 Anonymous
Anonymous's picture

Bernanke talking up the dollar is only a temporary reprieve for dollar bulls.

Fri, 10/09/2009 - 14:01 | 94225 Anonymous
Anonymous's picture

Agree, it is only a talk. It is about time.

Fri, 10/09/2009 - 13:20 | 94178 ShankyS
ShankyS's picture

This document was obviously not issued by the US Government.

Fri, 10/09/2009 - 13:23 | 94181 BobPaulson
BobPaulson's picture

This is a market where you go broke if you're in or out and the only winners are the gamers who go in 100% then pull out right when their frontrunning software tells them to. 

I find it incredibly frustrating there is no way to do well going long on anything. I guess that's the sentiment that leads to capitulation and the last "all in bear" who gets shafted the most for joining the insane Bacchanalia last.

I am going to stick with my 10% bullion, 30%PM stock and 60% cash knowing some jackass I know will triple his money for taking the big win at the roulette table claiming he's a genius.

OK, so I'm bitter.

Fri, 10/09/2009 - 13:40 | 94200 Anonymous
Anonymous's picture

The rumors about a potential bank holiday have been out there for a while; however, in recent days the rumblings seem to be getting louder that this will occur in early November. Is anyone hearing the same?

Fri, 10/09/2009 - 13:40 | 94201 Anonymous
Anonymous's picture

I just wish we'd get back to real trading and having a market. don't know about you guys, but there is NO volume on you don't want to go long, and you can't short because they are just jacking the indices higher.....

i want a real market again. this is like watching paint dry, plus, how the hell is a guy supposed to make a living?

Fri, 10/09/2009 - 15:22 | 94401 NRGTDR
NRGTDR's picture

sadly you go work for the government....the only employer that can print the money for your check

Fri, 10/09/2009 - 13:47 | 94208 Anonymous
Anonymous's picture

What a coincidence, I also have a record lack of confidence in investment managers....

Fri, 10/09/2009 - 14:20 | 94262 TumblingDice
TumblingDice's picture

Interesting. The big difference that has to be considered though is the increased percentage that SLP and HFT in general take up of all stock transactions.

Fri, 10/09/2009 - 14:49 | 94311 bugs_
bugs_'s picture

Banco Festiva in November?   I was planning for it

before October opex.  I know they'd rather put it off

till after xmas but we all know that time has run out.

Fri, 10/09/2009 - 16:12 | 94521 pooplagrande
pooplagrande's picture

I think the tastiest part of this chart is the confidence reading being as high as the sentiment reading (2007)...that is when people are most complacent...just blind bulls thinking that nothing could go wrong.

Seems like the comments on this thread are about the same as the managers ("Who the F knows what is going on"?).

Why do I have this feeling that this thing is just going to keep inching upwards regardless of what happens? Don't all of us ZH'ers all think that the underpinnings are rotten, there is manipulation by computer programs, con games with the government, data and banks? Doesn't the market continue to blow all that up daily with a big middle finger in our faces?

Guess I am bitter as well, because I sold out of this rally early...I'm mainly in cash and have been adding to shorts on the S&P for a month and have recently gone long the dollar. Maybe my reality is 97% different than the rest of the world...and/or I am just 3% idiot? Maybe since I am typing this into a comment box, I am starting to second-guess myself? Maybe that is my own indicator? I'm blowing my mind man... ;)


Fri, 10/09/2009 - 20:33 | 94866 Anonymous
Anonymous's picture

Imagine how bitter you'd be if you didn't participate at all like I did....Now my quandry is can the market remain irational longer then I can remain short.

Fri, 10/09/2009 - 23:32 | 95084 aus_punter
aus_punter's picture

mine has blown

Fri, 10/09/2009 - 18:01 | 94665 Anonymous
Anonymous's picture

An investment opportunity. This should be good for a laugh.

Sat, 10/10/2009 - 17:10 | 95452 pooplagrande
pooplagrande's picture

I think this is a new Madoff/Stanford organization...they manage it from their cells. WTF?

Fri, 10/09/2009 - 22:22 | 95008 Anonymous
Anonymous's picture


Do NOT follow this link or you will be banned from the site!