Have Investors Reached the Point of Maximum Pessimism? 16 comments
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The time of maximum pessimism is the best time to buy.
- Legendary Investor John Templeton
On Wednesday, Merrill Lynch (MER) released its monthly survey of fund managers for October. The survey covered 172 fund managers with $531 billion under management. Merrill called the survey “one of the most pessimistic” ever.
Here are some highlights:
- The number of managers believing the global economy is in recession jumped to 69% - from 44% in September.
- Sixty percent of managers believe the global economy will weaken over the next 12 months - up from 37% in September.
- The number of managers overweight cash increased to 49% - up from 36% in September.
- Forty-three percent of managers think global equity markets are undervalued - up from 15% in September. The October number is a 10 year high.
According to Merrill Lynch, three factors are coming together that tend to be associated with market rallies: low risk appetite, high cash positions and a belief that stocks are undervalued (“Is Pessimism Good News?” (subscription required), Brett Arends, The Wall Street Journal Online, October 15).
Along the same lines, on Tuesday, The Wall Street Journal reported that three high profile hedge fund managers (Steve Cohen, Israel Englander, John Paulson) have moved a lot of money into cash: “‘Smart Money’ Stays on the Sides: Hedge Fund Chiefs Like Cohen, Paulson, Move to Cash to Ride Out Storm” (subscription required). According to the article, Cohen sold about half his stock holdings last week, closing out the positions of 50 managers who work for him.
If ever there was a moment of maximum pessimism in the stock market, this is it.
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This article has 16 comments:
people are optimistic -in the current situation - a must read cut and paste into your browser
seekingalpha.com/artic...
As far as housing itself though, we're close.... After 2009's alt-A collapse (and potential subsequent flying of interest rates), we may be at a time that the world "House Purchase" would sound to society like someone committing financial suicide. When people try to persuade friends out of buying houses as if they're persuading an alcoholic to not drink, *THAT* is when we reached the bottom in housing.
Face it investors, you are being subsidized by Joe-Sixpack. Proud of yourselves?
Although our economy may be broken, I believe the fear factor can only go down from last week. We will recover from this, and it's a good time to buy. We may experience a flat stock market for the next year or so, but we will come back strong.
I talk about Warren Buffett's take on the current situation in www.investorpitstop.co...
Our government is inflating us out of our situation and the upcoming dollar devaluation is worrisome.
Glad you mentioned that. What came first, the Great Depression or huge social spending programs?
Fractional reserve banking, particularly when it is backed up by the government is a cheat. Not only that, it is unstable. Not only that, it produces mal-investments. Not only that, it causes and finances wars.
Who would guess that a banking system built on fraud and theft via inflation would cause such misery? Ludvig von Mises for one. He and F.A. Hayek predicted the Great Depression.
For somebody.