Sentiment Cycles

This is a classic:


Now if only I could remember where I pulled it from . . .

UPDATE August 9, 2006 5:05pm

Here’s another version of the same chart:


via Frank Barbera, The Fed May Not Be Done    

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What's been said:

Discussions found on the web:
  1. Eclectic commented on Aug 6

    Who cares where you got it!…. The question is; where are we?

  2. Eclectic commented on Aug 6

    Anyway, I’m thinkin’ somewhere around “denial” but not to “fear” yet.

  3. Quiddity commented on Aug 6

    I’d say we are at anxiety, trending to denial.

  4. bjk commented on Aug 6

    That graph gets it exactly backwards. People are most optimistic where the graph lists “anxiety” and “denial” and “fear.” That’s where the bottomfishers think they’re getting a great bargain. And where it lists “hope” is where the bottomfishers all sell.

  5. Robert Cote commented on Aug 6

    Just like any herd behavior at infection points and changes in direction individual chaos overwhelms underlying trends. There are still large numbers of sheeple in the Euphoria category. Witness the continuing negative savings rate and massive MEW amongst some while at the same time people like me have recently sold off every non personal piece of real estate.

    At the top of a cyclical process this noise in wave terms is called froth. Hmmm, who in the highest levels of economics do we remember using that term? “Although a ‘bubble’ in home prices for the nation as a whole does not appear likely, there do appear to be, at a minimum, signs of froth in some local markets where home prices seem to have risen to unsustainable levels.” – Alan Greenspan 06/08/05.

    Likewise at the trough the disorderly behavior of individuals will in wave terms be likened to churn. This is indeed the point of maximum oportunity. Those of us with forward thinking perspectives will be able to take advantage of those still panicing.

    I commented back in April on the closer resemblance to physical waves ratrher than mathematical waves:

    By my estimate $2.5T in MEW is unsupported by reasonable asset valuation. In total somewhere between $7T and $9T in phantom equity is exposed in any retracement to the mean. An orderly retreat will allow inflation to eat away much of this. A decline in the dollar may result in a disproportionate amount of pain to be taken by foreign investors. No matter how the pain is spread, there will be consumer pain. Likewise because of govt spending policies that resemble the proverbial cricket in summer we can expect massive deficits and even larger tax inceases. I hope everyone likes their neighbors because noboy is moving for a very long time. The new immobility class has moved in to stay.

  6. beck commented on Aug 6

    Eclectic wrote:
    >Who cares where you got it!….
    >The question is; where are we?

    Back from fear and into anxiety again!
    And on the way back to fear!
    This time all the way down to despondency.

  7. Brian commented on Aug 6

    In a bull market Fear is where you should buy right? Because it will, in retrospect, turn out to be a dip. Which is why the start of bear markets are so dangerous. You can be picking up bargains all the way down.

    Everybody is so freakin bearish, even on CNBC of late. Cramer telling you to buy PEP. Liz Ann Sonders telling you to go into cash. Joey Batts was even sounding ursine on Kudlow the other day. Thus the “buy the dip” temptation is very strong right now.

  8. Leisa commented on Aug 6

    Brian…given that the Dow and S&P have not done much other than exhaled (as opposed to the kick in the stomach that has left the Nasdaq thrashing about on the floor in pain), do you think that there is any believable trough here?

  9. Bob A commented on Aug 6

    I think that chart was adapted from a study on marriage…

  10. Ho John Lee’s Weblog commented on Aug 6

    The investor sentiment cycle, tech and web 2.0

    Silicon Valley is built on optimism and entrepreneurship, but lately, most tech companies can do no good in the eyes of public market investors, who are presently in a mood to sell on no news, bad news, or even good news.
    At the same time, private …

  11. Anup commented on Aug 6

    Chart came from Mish’s GlobalEconomicAnalysis site?

  12. Brian commented on Aug 6

    I dunno what’s going on. I’ve got a few stocks I can’t let go of but I’m not buying anything. It seems as a rule of thumb that anything with a PE over 20 gets shot. The Nasdaq is full of stuff like that so that explains the difference between the S&P and the Nasdaq performance. So, after taking out the Nasdaq they go for the S&P next? Not implausible.

    I think the US economy is straining for mediocre at best but is it so shaky that another .25% means we should go all cash and stock up the survivalist compound?

    I only own one US stock anyway (CHK) . . . wonder if you can hide out overseas. Canadian energy and european pharma and booze.

  13. diva commented on Aug 6

    Be very careful Brian…… as the NASDAQ loved the deflation from 97 through 02.
    (hence the goose for it while everything else was ugh)
    Now we have the reverse = inflation.
    The NASDAQ hates inflation!
    Stay away!!!
    Tis time for all the old timey inflation stocks to do well.
    The NASDAQ is not part of the current ‘in’ crowd, its their time in the tank.

    And, thanks to our friends at the Fed….. we have plenty more inflation in the pipeline for months to come.

    (maybe polyester and bell bottoms will even make a come-back)

  14. Brian commented on Aug 6

    Not buying Nasdaq. No way.

    I’ve got a fair amount of energy. Some base metals. Some allegedly defensive stuff like I mentioned: drugs n’ booze.

    Keep thinking of getting out of the commodity stocks and into the commodities with one of those newfangled ETFs the kids are always talking about.

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