Does It Pay to Follow the Smart Money? [View article]
Great analysis. Thanks.
And you are correct that these data can be used as contrary indicators if what you are looking for is predictive ability from the groups.
As the developer of the NAAIM Survey of Manger Sentiment, I can tell you that we do not try to be predictive - no one can do that with any level of consistency. So, it is no surprise that one can get contrarian results using this data in ways that do not represent respondent's actual practices.
What NAAIM members do is recognize what actually is happening in the market place and react to that. We tend to be more reactive and less predictive. If the market is going up naturally NAAIM member managers will become more and more fully invested until the market turns around and declines.
This is the reason NAAIM members will be highly invested at market peaks. Anyone who would not want to be fully invested going into a peak is, investment-wise, doing something wrong. The most any investor can hope for is to recognize that peak quickly and be just as responsive on the downside to protect the principal gained on the upside.
So although you can squeeze a contrarian argument out of the data, what your readers should understand is that few NAAIM members feel they need to be locked in to holding for 30, 60 or 360 days, the periods your analysis covered. If the investment environment changes, holdings may change quickly, and this variable is difficult to build into studies, even those done as well as yours.
NAAIM Trend Survey Of Manager Sentiment [View article]
As the developer of of the NAAIM Survey of Manager Sentiment, and the organizations current President, I would take exception to the author's description of the recent rise in NAAIM member expsoure to the stock market from a low of below zero on October 8, to a recent high of 29 on January 7th as "more and more aggressively long.".
The average stock market exposure of 29 indicates that our managers, on average are still 71% out of the equity markets, still pretty conservative, really. Compared to a base of zero, there has been some increases in exposure over the past couple of months, but isn't buying low what we are supposed to do?
Does It Pay to Follow the Smart Money? [View article]
And you are correct that these data can be used as contrary indicators if what you are looking for is predictive ability from the groups.
As the developer of the NAAIM Survey of Manger Sentiment, I can tell you that we do not try to be predictive - no one can do that with any level of consistency. So, it is no surprise that one can get contrarian results using this data in ways that do not represent respondent's actual practices.
What NAAIM members do is recognize what actually is happening in the market place and react to that. We tend to be more reactive and less predictive. If the market is going up naturally NAAIM member managers will become more and more fully invested until the market turns around and declines.
This is the reason NAAIM members will be highly invested at market peaks. Anyone who would not want to be fully invested going into a peak is, investment-wise, doing something wrong. The most any investor can hope for is to recognize that peak quickly and be just as responsive on the downside to protect the principal gained on the upside.
So although you can squeeze a contrarian argument out of the data, what your readers should understand is that few NAAIM members feel they need to be locked in to holding for 30, 60 or 360 days, the periods your analysis covered. If the investment environment changes, holdings may change quickly, and this variable is difficult to build into studies, even those done as well as yours.
NAAIM Trend Survey Of Manager Sentiment [View article]
The average stock market exposure of 29 indicates that our managers, on average are still 71% out of the equity markets, still pretty conservative, really. Compared to a base of zero, there has been some increases in exposure over the past couple of months, but isn't buying low what we are supposed to do?