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The Warning Sign One Permabull Is Concerned About Is Now Flashing "Record" Red
"Never, since 1900, have investors been this persistently bullish," warns Wells Fargo's Jim Paulsen. While the 13 previous cautionary signals since 1900 suggesting investor sentiment was too high have not been perfect, they have proved to be fairly good warning signs; and along with "massive overvaluation", and a dramatic "decoupling of markets from economic productivity" this extreme sentiment reading completes the trifecta of flashing red warning signs for US equity markets.
Strike 1... "Massive overvaluation"
Strike 2... "dramatic decoupling of markets from economic productivity"
and finally, Strike 3... "near-record extreme market sentiment"
As illustrated, the stock market has typically struggled once the R-squared (investor sentiment) has risen above 90%.
While the 13 previous cautionary signals since 1900 suggesting investor sentiment was too high have not been perfect, they have proved to be fairly good warning signs. For eight of the 13 signals, the stock market either immediately or fairly soon suffered a bear market (i.e., 1906, 1929, 1937, 1946, 1956, 1965, 1987, and 2007).
After both the 1926 and 1998 signals, the stock market eventually suffered a correction and after both the 1952 and 1994 signals, the stock market was essentially flat and volatile during the subsequent two years. Only the caution suggested by the 2003 signal proved inappropriate.
Finally, the timing of a few signals were remarkably clairvoyant (i.e., September 1929, September 1987, and December 2007).
* * *
Since 1900, only when investor sentiment is above 90% has
the median one-year forward percent change in the stock
market been negative.
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Oh my, charts.
Looks like you can't lose. Buy the dip, serfs.
Meh, fuggedaboutit.
Damn, this is like 1.2 Lehmans!
Qe4eva
Who are these ""investors"" they keep talking about??
Never before have central banks gone to the lengths that they have now. They will continue to do what they have until the real economy gets better. Whether what they're doing works or not doesn't matter. What matters is all long as they continue easing via QE or low rates, stocks will continue to go higher. If you don't agree, pull up a chart of the S&P since 2009. They control the money, end of story.
Until they don't.
Doesn't fucking matter. I've been trying to short the whole time. The shit is going up. Until it stops.
Let me know when you go long.
Already long options, but took half off the table when I caught a double today, so riding for free now. So yeah, it's going down.
Was holding short the Nikkei all weekend, and got out at a small profit. But markets are insane now. They aren't even "markets" anymore. No point in even trying.
LOL, Sorry Dazman but that is funny.
Oh I agree. It's is "funny" that I even try anymore. But it's ok. The lesson is to wait until it cracks and then smash it. But gotta wait. It is coming, it's only a matter of time.
I'm normally the counter-trender trying to pick turns, which is why I try short so much. So yeah, as soon as I go long, it'll crash
I know how you feel and I am right there with you. 1st comment wasn't a jab, just a joke btw.
Oh it's a joke alright. The whole f'in' system in a joke! :)
The only thing you're going long on is black cocks up your anuses when your guns and gold are outlawed and your sent off to prison. The police aren't afraid of you idiots either. They know that the only people you NRA nut jobs can kill is poor innocent school children.
A bit fuckin' extreme, don't you think!?
That doesn't sound very compassionate. Sounds like your handle should be democraticdouchebag.
Obvious troll is obvious.
all these charts remind me of how dumb I am.
Those charts remind me of drunken NFL Sundays when John Madden was in this prime scribbling all over the teleprompter.
Don't worry, the correlation of the R-squared chart is pretty weak, so if you didn't understand it, that was probably the proper response.
Start working at home with Google ! Its by-far the best mixed bag of goods I've had. Last Thursday I got a trademark new Bmw since getting a check for $6474 this - 4 weeks past. I began this 8-months ago and immediately was coming with house at least $77 per hour. I work through this connection, go.to tech marker for work detail.... www.globe-report.com
A 1.5% reduction in stawk prices? The Fed would NEVER let that happen these days.
Perchance did you notice Futures were down 19 % last night and NY Fed Pres Dudley said soothing words early this AM and the whole thing turned on a dime? And not some mickey mouse turn but up, up and away. Fuck the Fed.
No problem, nothing to see here, the unicorns are on the way....
Is this the same Jim Paulsen that has always said it is always a good time to buy stocks? Or is he from Wells Capital? Moron was saying 'buy' from Summer 2007 to Fall 2008. He's just another snake oil salesman like Jim Cramer. Those buying at today's level can expect maybe am average 2% return (best case) over the next decade. What fools!
The market never had QE4Evuh either.
But Goldman Sach's soldier of the the NY Federal Reserve, William Dudley, came out to push the markets higher today. The Federal Reserve can't allow markets to drop.
QE4 with rates at 0. There has never been as much Federal Reserve intervention.
Expect continued larger QEs (QE4 $120 billion/month or larger?). Maybe QE5 will be $200 billion/month. Until a currency crisis.
You wonder if the William Dudley walks in every morning at the NY Fed and tells someone sitting at a terminal how much to goose it up?
It is so blatantly Full Fuckan Retard now it defies description.
it will continue until the world gives a big fu to the dollar
Dude think about it. Everyone is pretty much wise to the FED buying up the markets. Politicians would have a field day calling those bastards in if they ever let the market crash. The markets couldn't give a rats ass about market sentiment or this or that indicator. FED makes it go up if they make it go down they get called in for possible prosecution by the politicians that lose money if the market would ever go down. Done deal. BTFD until you see those mushroom clouds.
"BTFD until you see those mushroom clouds."
Like Zimbabwe. The currency went to crap but stocks rocketed upwards.
This is actually how they fix the middle class when this bubble pops hyper deflation.
Eradication?
These charts are all mumbo jumbo to me.
N-U-M-B-E-R-S!!!
http://www.zerohedge.com/news/2015-04-04/only-tv-news-report-economy-you...
Direct link:
https://www.youtube.com/watch?v=HN2iVe8_Ato
He might have been a permabull but now he's just a permaidiot. We've got a great President with a solid adminstration behind him and they only way things are going is up, up, up!
hahahahahahahaaaaaa, i almost pissed myself! You must be typing with sarcasm exiting your fingertips like lighting because no one on this planet could be so stupid to drink that drug laced kool-aid.
you don't believe in america? the american dream? the greatest nation in the history of the world, shining light on the hill, the beacon of freedom and liberty for the world, spreading the gospel truth to all people allowing them the unalienable right to determine their fate with their own free will to chose between us and them enforced by american made weapons of mass destruction and chaos.
how dare you attack a patriot!
Look at the huge drop '72-'75 - everything had to be revalued when the Dollar was unhinged from Gold.
Now valuations are based on public debt - "free" money supplied by the FED and bridges to nowhere.
Since Carter TM
I am a wait for the crash and then buy everything type.
My powder is dry and waiting.
The higher the market goes, the more money will be used to fund buybacks and pay the 1% leaving nothing left for real business.
There is so little real business going on that there is no actual money flowing in the system. With no real money flowing, commerce has ground to a halt. Salaries of actual workers are being paid for with fumes. Very soon businesses will not be able to pay people to work. It is already happening in retail. You've got three managers working 30 hours and the part timers all get about 8 hours a week.
Good point. It's always about the opportunity cost.
blah blah blah...the market is going to crash... blah blah blah... this is getting old
I have a 1.00 bet we could crash the whole thing and get rich doing it.
+100
Billy Ray !!!
duplicate
Here are some more signs of a coming recession.
http://michaelekelley.com/2014/12/20/leveraged-loans-predict-crash/
http://michaelekelley.com/2015/02/20/fed-warns-of-two-bubbles/
http://michaelekelley.com/2015/02/24/would-you-pay-39-more-than-asked/
http://michaelekelley.com/2015/03/24/stocks-could-have-worst-april-since-1970/
Here is how to prepare yourself.
http://michaelekelley.com/2014/10/16/8-things-to-do-when-recession-happens/
Good luck!
You must be Michael Kelley
I agree.. it's all blah blah... can we have the largest crash in history , a huge war, etc etc already???
cause we are all looking bad after telling our friends and family this for so long....
We need to save face !
Peace loving Obummer can save the world by bombing Israel, have the gestaopo police the markets, adopting the yuan as the reserve currency and my gold will not even go up.
and disappear Nulandman
Weeeelllll, shheeattt.. Where was this last chart when the R^2 was in the 80-90% range??? If it's that good of a predictor, Zero should've been telling us we still had time to go all in! But apparently it wasn't a good enough chart to make that call. But now that it's over 90%, the chart is gospel!
Perhaps I am too dense. Did I miss WTF the R squared regression is? I can plot all kinds of fancy shit with no explanation and yell SELL EVERYTHING.
LONG CALIFORNIA AGRICULTURE.
Yea, so says Moonbeam ... but short SoCal landscaping services. Also water rationing will be the biggest detriment to immigration ... I'll think I'll move back to Mexico
The individual investor is still out of the market. It is the algos that are "persistently bullish".
they were this bullish in zimbabwe, though.
How clueless can you be??
There was no FED in 1900!!!!!!!
R-Squared, indeed.
But, but this time it's different!
This would all be true in a functioning free market. IF...
The government and/or the Fed are actively, through financial firms acting as proxies, or in conjunction with foreign central banks, BUYING US stock ETFs and/or index funds.
Everyone stay long and no one gets hurt ... shut up and eat.
Jimbo's missing the key point
There's are no investors, let alone persistently bullish investors
There's only the persistent buyer of last resort
Rubbish analytics. Markets were not that deformed with such present level of collapsed price discoveries. Markets were not flooded with such level of liquidity from Central Banks being the principal player in the market.
Historical patterns shouldn't be as relevant these days considering what the govts are up to.
47% receive some form of government payment.... 32% of the workforce not working....20 million illegals tapped into the free government shit....iran getting a nuke to start ww3..... happy days are here again...