Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
AMD Ryzen 4900x / 5900x and 4950x / 5950x Zen3 4th Gen IPC and Clock Speed and Core Specs - 14th Aug 20
Stock Market Gap Fills Suggests Market Momentum May Stall - 14th Aug 20
Silver May Be Overextended – But It’s STILL Cheap - 14th Aug 20
A Short Guide To Making Your First Stock Market Investment - 14th Aug 20
Is Tech Reality Affects our Dating Possibilities? - 14th Aug 20
Will You Make Money in the New Silver Bull Market ? - 13th Aug 20
Hyper-Deflation Capital Destruction And Gold & Silver - 13th Aug 20
Stock Market Correction Approaching - 13th Aug 20
Silver Took the Stairs to $21 in 2008, Took Escalator to $29 2010. Is Silver on Elevator to 120th floor today? - 13th Aug 20
President Trump Signs Additional COVID Relief – What To Expect from the Markets - 13th Aug 20
Has Gold's Upward Drive Come to an End? - 13th Aug 20
YouTuber Ads Revenue & How to Start a Career on YouTube - 13th Aug 20
Silver Notches Best Month Since 1979 - 12th Aug 20
Silver Shorts Get Squeezed Hard… What’s Next? - 12th Aug 20
A Tale of Two Precious Metal Bulls - 12th Aug 20
Stock Market Melt-Up Continues While Precious Metals Warn of Risks - 12th Aug 20
How Does the Gold Fit the Corona World? - 12th Aug 20
3 (free) ways to ride next big wave in EURUSD, USDJPY, gold, silver and more - 12th Aug 20
A Simple Way to Preserve Your Wealth Amid Uncertainty - 11th Aug 20
Precious Metals Complex Impulse Move : Where Is next Resistance? - 11th Aug 20
Gold Miners Junior Stcks Buying Spree - 11th Aug 20
Has the Fed Let the Inflation Genie Out of the Bottle? - 10th Aug 20
The Strange Food Trend That’s Making Investors Rich - 10th Aug 20
Supply & Demand For Money – The End of Inflation? - 10th Aug 20
Revisiting Our Silver and Gold Predictions – Get Ready For Higher Prices - 10th Aug 20
Storm Clouds Are Gathering for a Major Stock and Commodity Markets Downturn - 10th Aug 20
A 90-Year-Old Stock Market Investment Insight That's Relevant in 2020 - 10th Aug 20
Debt and Dollar Collapse Leading to Potential Stock Market Melt-Up, - 10th Aug 20
Coronavirus: UK Parents Demand ALL Schools OPEN September, 7 Million Children Abandoned by Teachers - 9th Aug 20
Computer GPU Fans Not Spinning Quick FIX - Sticky Fans Solution - 9th Aug 20
Find the Best Speech Converter for You - 9th Aug 20
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Stocks Bull Market Waiting For Retail Investors Finally Climb Aboard

Stock-Markets / Stock Markets 2010 May 06, 2010 - 06:21 AM GMT

By: Money_Morning

Stock-Markets

Best Financial Markets Analysis ArticleJon D. Markman writes: Data shows that retail investors have not yet bought into the bull market. But when they eventually do regain their confidence, the market will soar to new heights.


Consider this: Trim Tabs Investment Research, a boutique data analysis firm in the San Francisco Bay area that's popular with hedge fund managers, last week declared that it had turned fully bullish from cautiously bullish on U.S. stocks. The firm thus boosted its recommended equity exposure to 100% long from 50% long.

The reason for Trim Tabs' change of posture: Its unique blend of macroeconomic data shows the U.S. economy making a gradual recovery, corporate buybacks are picking up during earnings season, and demand indicators are increasingly bullish.

Let's spend some time understanding their point of view, as the firm is influential among large institutions.

First, its analysts see income tax withholdings up 3.4% year-over-year in the past month, which is quite a bit higher than the 2.9% year-over-year growth rate seen in the three months prior. That suggests wages and salaries are rising sequentially, which is something we've talked a lot about in the past month. Also, Trim Tabs' proprietary measure of online job postings is up 33% year-over-year, which is the best reading of the past year.

As the economy improves, companies are feeling more confident about their business, and in many cases, they are investing in their own stock instead of just adding new production lines in their factories. When companies take stock out of circulation via buybacks, their earnings per share naturally rise. That makes their valuation lower, which in turn attracts more open-market purchases from third parties. Public companies also are buying other public companies at an increasingly rapid rate, which has the effect of taking more stock out of circulation.

Trim Tabs reports that five new cash takeovers using $3.9 billion in cash were announced in the past two weeks, and new stock buybacks last week rose to a four-week high of $4.5 billion. This is the ultimate in insider buying. Meanwhile, not too many initial public offerings are being launched, as the new-issues calendar has been relatively quiet.

Finally, Trim Tabs notes that investment demand trends are very favorable. They measure this in two ways, one conventional and one original. The first combines price, volume and breadth to determine the extent to which demand is exceeding supply; it's much like the method that Lowry's Research Corp. uses to construct its Buying Power and Selling Pressure indexes. The more interesting second approach determines the balance of fear and greed by looking at the cash balance of equity funds, excess margin debt, exchange-traded fund (ETF) flows and retail money market fund assets.

That second measure is super-bullish, says Trim Tabs, for this reason: Despite the continuing rally off the March 2009 and February 2010 lows, investors pulled $2 billion out of U.S. equity funds in April, bringing the year-to-date outflow to $6.6 billion. ETF investors tend to buy high and sell low, which Trim Tabs says that makes their actions one of the best contrary indicators in their data sets. In short, the more ETF investors hate stocks, the more Trim Tabs likes them.

Trim Tabs notes that U.S. equity funds have posted outflows in six of the past eight months, and have not received a $10 billion-plus inflow since May 2009. Since the average U.S. equity fund is up 8.6% this year, and the Standard & Poor's 500 Index is up 79% since the March low, it's pretty amazing that U.S. stocks aren't drawing more interest from mutual fund investors.

Strangely, the analysts observe that global funds remain much more popular than U.S. equity funds, taking in $4 billion in April. But it's bonds that are really getting the love. Bond mutual funds took in around $20.2 billion in April.

Trim Tabs says it's remarkable that retail investors don't seem to worry about governments' ability to service their debt, or that the average bond fund is up only 2% this year. In total, bond funds have received $110.6 billion this year, say the analysts - about 3.5 times the $32.0 billion that has flowed into equity funds.

Bottom line: The public has still not bought into this U.S. bull market yet. Retail investors will, you can be sure, but it will take a while before they are comfortable with the idea of even starting the task. Once they do, the inflows will likely swell over a period of years - much as occurred in the 1990s - not months. It is a little hard to remember back that far, but I vividly recall investors anticipating a 1987-style crash and double-dip recession from 1991-1994. They finally got a very slight recession in mid-'94, and it was only in 1995 that the meat of the 1990s bull market got underway. A similar scenario, with a different script, may be awaiting us in this decade.

The only caveat, and it's a big one, is that Europe and China are not cooperating with U.S. strength and could drag down Wall Street. We'll keep a close eye on this development to see whether this wrinkle develops into trouble.

Source : http://moneymorning.com/2010/05/06/retail-investors/

Money Morning/The Money Map Report

©2010 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules