Bank of America’s monthly survey of investors showed a dramatic rise in
confidence in August, with a net 72pc expecting growth to accelerate over the
next year. It is the highest in reading since 2009. Almost everybody expects bond yields to rise as deflation fears evaporate,
with just 3pc still worried about the risk of an economic relapse. Managers have
slashed their bond allocation to a 28-month low.
The survey is watched by veterans as a "contrarian indicator", tracking herd
mentality at key moments. Michael Hartnett, the bank’s investment strategist,
advised clients to take the opposite trade and buy US Treasury bonds.
The exuberant mood comes as margin debt on Wall Street hovers near $377bn,
just below its all-time high and well above peaks before the dotcom crash and
the Lehman crisis. Since the first of the year, retail investors (unsophisticated sheep) have
shoveled a bit south of 100B into stock mutual funds. You can always rely on the
middle class investor to identify the proper time to exit equities.
This new stampede of sheep is contrasted with the sheep pulling out a little
south of 200B in first six months of last year.
Sell Low, Buy High - the operative slogan of those late to party, drinking
the dregs from the punch bowl. A likely apocryphal story about Bernard Baruch, a legendary Wall Street
trader, expressed that he knew that it was time to get out of the market when
his shoe shine boy offered him hot stock tips.
Professional investors and hedge fund managers are holding unprecedented
levels of cash (30-40%) and are awaiting the sheep's perfect timing of the
market top. They know better than to try and game central banks. There is no
underlying strength in just about any economy - just central bank roulette.
- You may ask yourself, how do I work this?
- You may ask yourself, where is that large automobile?
- You may tell yourself, this is not my beautiful house
- You may tell yourself, this is not my beautiful wife
- Letting the days go by, let the water hold me down
- Letting the days go by, water flowing underground
- Into the blue again, after the money's gone
- Once in a lifetime, water flowing underground
- Same as it ever was, same as it ever was,
- same as it ever was, same as it ever was
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Individual investors are pouring tens of billions of dollars into a new generation of complex investment products, and regulators are raising concerns that not all buyers understand the costs and risks.
Outside scrutiny is intensifying on securities firms' sales practices and whether so-called alternative products—ranging from certain types of mutual funds to vehicles that invest in highly indebted companies—are suitable for all of the Americans flocking to them.
Some state securities regulators are focusing their examinations on alternative-product brokers, while officials at Wall Street's self-funded watchdog, the Financial Industry Regulatory Authority, say they are planning to file civil enforcement actions
A 6.5-magnitude earthquake struck New Zealand on Friday, disrupting transportation and trapping people in elevators. But authorities said there were no reports of serious damage.
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