Sep

3

Just scanning the headlines on any given day it is easy to see the biases built and if you had to put the pundits in one camp or the other with regard to view on the stock market, the academics are universally bearish, business CEOs bullish, government officials try to appear bullish but in their actions are bearish, financial journalist are bearish, mutual fund managers are bullish, hedgefund managers bearish, bond fund managers bearish on everything and real estate developers are always bullish down their last penny. So in reading them maybe those times when they go against their natural biases is when to really pay attention.

Vince Fulco adds:

To support what you say, the latest results of CFO mag/Duke survey (July/August) of 1,102 CFOs indicates the top three concerns about macro are 1) consumer demand, 2) fed govt policies, 3) price pressures.

Within their own co's: 1) ability to maintain margins, 2) ability to forecast results, 3) maintaining morale. Geographic breakdown was 535-US, 139-EU, 219-Asia ex. China, 209-China.

When asked how one would characterize company's market position, 47% said cautiously pursuing growth and 26% aggressively.

Rocky Humbert comments:

Mr. Coker makes an excellent observation. Trying to refine this a bit more, I note that the "pundits" seem to be represented by a recurring small group of quotees.

Academics: I've previously demonstrated a reverse correlation between stock prices and google hits on "Nouriel Roubini." Should Wharton's Siegel ever turn bearish, it will be an all-in buy signal for stocks, and the day when Roubini turns bullish, the opposite will be true.

CEO's: There's a corpus of studies which show that one can be well-served by watching insider buying. "Watch what they do, not what they say."

Financial Journalists: "Man bites dog" sells newspapers and "The consensus is always wrong," sells newspapers. The latter ignores the fact that "the sun will rise tomorrow" is a consensus opinion that has been (so far) correct, and no one should pay much heed to a guy who bites his cocker spaniel anyway. Notably, long-term bear and high-IQ Jim Grant turned publically bullish on US stocks and bearish on US bonds in March, 2010 and has been bullish on Japanese stocks for the last decade. In fairness, he's been bullish on gold since 1981.

Mutual Fund Managers: They are always bullish. But it's not a good idea to ask one's barber if one needs a haircut. Most importantly, there are NO mutual fund managers who have outperformed their benchmark over an entire career. Two came close, but Peter Lynch retired too early, and Bill Miller retired too late.

Hedge Fund Managers: Byron Biggs (who is Druckenmiller's Father-in-law) has been consistently bullish for the past three years, except for an afternoon on June 30th (which was an excellent buy signal.) The consistently profitable hedge fund managers rarely talk to the press (on the record) for obvious reasons.

Bond Fund Managers: One wonders how Bill Gross can spend so much time in front of the camera and still run his portfolio. Yet he uttered seriously bearish bond comments in March 2010, and the rally which followed was breathtaking. This is an brilliant example of Duncan's point.

Real Estate Developers: Donald Trump's casino properties have filed for bankruptcy three times. A hat-trick of this magnitude rivals Wayne Gretzky. If one includes mutual fund investors, Trump may have lost money for more investors than any other real estate promoter. Truly the "great one."

Government Officials: I question whether anyone listens to them at all.

Here are three more observations:
1) University Endowment managers believe that they are all above average investors, and "you can be too."
2) "Value investors" believe that anytime a price moves up a lot, it's a bubble.
3) At any cocktail party, there is always one guy who owned a stock that rose 1000% during the previous month.
4) Baby boomers who rode the Nasdaq/S&P bubble in the late 1990's are almost always bearish about the economic prospects for the USA.


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