The Most Bullish Sign I've Seen In Awhile

From Merrill Lynch's fund manager survey, this is the most bullish thing I have read in some time:

Risk Aversion Reaches New Highs

30 PERCENT OF RESPONDENTS HEDGED AGAINST FURTHER EQUITY SELL-OFF

NEW YORK and LONDON, February 13, 2008 — Institutional investors are more risk averse now than they have been in seven years, according to Merrill Lynch's Survey of Fund Managers for February. About 30 percent of the panel say they have hedged against further falls in equities over the next three months.

Fears over the economy and corporate profitability have stimulated a rise in portfolio cash levels to an average of 4.7 percent, up from 3.9 percent in January. A net 41 percent of fund managers are overweight cash, the highest since September 2001's terrorist attacks on the United States. Investors have a shorter-term focus than at any time since March 2003. Risk appetite has plunged to new lows with a net 40 percent taking a lower level of risk than normal. The FMS Composite Indicator for liquidity and risk has fallen to 31, its lowest level since the survey first tracked risk appetite in April 2001. [Emphasis mine]

[via ML]

Comments

[phinsuntanning]

bullish? look at the leading indicators, to be bullish on this you must be a blind guy walking in the grand canyon, capital preservation is the name of the game now...

[calvino]

Paul, it is tremendously bullish, and also shows how much smarter you are along with Merry Grinch. The idea of always betting against the little man, it is an automatic IQ adjuster, in your favor of course. Unlike the wisdom of the Masses, you bet on it's stupidity. And you are smart, very smart. You have been gaming little man with Lying Ben and Cheating Hank, along with his antecedent, for many many years. And the game will never change - you have been given license to game little man. Because you are smarter, being a contrarian. Your helicopter is out of blanks, never having had bullets. You gamed little man by slowly bankrupting him and sending his wealth to yourself and your friends overseas. But little man is shook out, he has no more credit, no more savings, no more anything. So whom are you going to game now?

[mkreisel]

"Fears over the economy and corporate profitability have stimulated a rise in portfolio cash levels to an average of 4.7 percent, up from 3.9 percent in January."

4.7% cash level is still pathetically low. During the short bear market of 1990, stock mutual funds had 12% of their assets in cash, and money market fund assets outnumber equity fund assets by 2:1, today this ratio is exactly inverted.

[Tyrell_sentry]

Tomorrow will not look like today or yesterday. The money lending machine is broken and it is not going to be back in operation any time soon. It puts the squeeze on everyone. It increases interest expenses for businesses and households, especially ones whose finances are doubtful or marginal. The old tips, tricks, gadgets and rules of thumb like sentiment do not work when the jig is up and the game changes. This is about behavior not support levels, sentiment, free cash balances or any other metric. I cannot figure out if folks are blind, driving using the rearview mirror or in some kind of trance. It's time to wake up and realise that the collateral is being liquidated to repay the debt, the debt is -- whereever possible -- being recalled, repriced or no longer extended. The ground rules have changed. We're not in Kansas anymore.

[Long-ShortGuy]

What a bizarre set of comments. Paul's point is simple (and he's right): highly negative sentiment can't get worse; lots of hedging means significant pent up demand for stocks. The earlier commenters just didn't seem to get this.

[David Lentz]

I'm hoping that tomorrow IS a different game than we played yesterday, or the day before.

That old game, where people breathed credit like it was air, and ignored the value of it, was a bit difficult to play, as the fiscally irresponsible were rewarded about as well as the fiscally responsible.

Perhaps in this Brave New World, a higher credit score will actually mean something, and open doors that are closed to others.

I'm ready to try something different. Different is not necessarily worse. Could be better.

[locke]

An intelligent person would need more than two datapoints to draw a meaningful conclusion. What were cash levels in 2005? In 2002? In 1987?

[zenalgorithm]

People were extremely bearish when the S&P500 was at 1576 just a few months ago. American assets are overvalued by 30-40%. With the current liquidity issues, not even the FED can keep this bubble inflated too much longer. Houses in Las Vegas are worth half of what they were in early 2006. Miami and Las Vegas are the canaries in this gloomy market shaft.

[jf]

highly negative sentiment in fact can be correct . You can feel bad for a long time,and reality can be bad for an equally long time . Things can get worse than you feel about things. You can become more than hgihghly negative, you can get suiciadally depressed. Things don't have to be better than people feel about things

[DWest]

Some posters asked the right question and here is a longer term look at the series. The cash level is the highest in about 5 years, but looking at 40 years of data, we are just off all-time lows. Sell this rotten maggot infested market that only rises when volume is low.

Cash Levels

[DWest]

Try link again:

Cash Level

[DWest]

Just cut and paste this:

home.comcast.net/~RoyAshworth/Mutual_F...

[DWest]

Can't figure this site out...replace xx with tt:

hxxp://home.comcast.ne...