Though the market keeps raging to the upside, I keep seeing bearish signs in market sentiment – the VIX is hitting multi-year lows, NYSE short interest [9] is hitting a four-year low, the ratio of insider selling to buying is running at what John Hussman [10] calls “panic level,” 8 to 1 (for every share bought eight were sold). With that said, I really have no idea if market will go higher or lower in the short run (and no one does!). I am sure there is plenty of contrarian bullish sentiment as well. For instance, most mutual fund inflows are going to bond funds [11], while US equity funds are seeing outflows. Even for those who don’t believe in market timing, the stock market seems to have this incredible ability to turn you into a market timer. Every time I get the inkling to time the market I remind myself of Milton Berle’s saying: “I used to be bullish, then I was bearish. Now I’m brokish!” The solution is simple: analyze and value individual stocks; and the cash in your portfolio should not be a byproduct of your view on the market, but a residual of your individual buy and sell decisions.
Reminder: VALUEx Vail 2012 will be held (as you’d expect) in Vail on June 20-22. You can find more information about VALUEx Vail and how to apply, here [12].
Vitaliy N. Katsenelson, CFA, is Chief Investment Officer at Investment Management Associates [13] in Denver, Colo. He is the author of The Little Book of Sideways Markets [14] (Wiley, December 2010). To receive Vitaliy’s future articles by email, click here [15] or read his articles here [16].
