Fear & Greed Index

James Montier’s was the Global Equity Strategist of Dresdner Kleinwort Wasserstein. (He will retains the same title of  global equity strategist at Societe Generale) He developed a "Fear & Greed Index."

He describes F&G as "a risk adjusted price momentum measure
between global equities and global bonds. In the past it has served as
a powerful contrarian indicator at a 12 month time horizon."

What is it showing right now?

Fear & Greed Index
click for larger graph


courtesy of James Montier

As to the history of this indicator:

"I’ve found that when the F&G is above the upper limit the
returns on equities over cash are a meager 2% per annum, but when F&G is
below -2 then the returns over cash are more like 14% per annum over the
next 12 months.

Right now it tells us that neither of these two extremes is
true. I never try to forecast where the F&G is going, but rather
use it as a measure of what my friend John Hussman calls market

James now blogs at behaviouralinvesting.blogspot.com.

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What's been said:

Discussions found on the web:
  1. Florida commented on Oct 9

    Shouldn’t it be “The end is nigh,” as opposed to “neigh?” Or are ponies now mixing it up with the bulls and bears?

  2. Woodshedder commented on Oct 9

    It is telling us that neither of the extremes is true.

    Sorry, couldn’t resist.

  3. Chris commented on Oct 9

    Anyone know where to find the current updated edition of the F&G index?


    BR: Its James’ proprietary index. This is the current version. To have access to it all the time, you need to be a client of his firm . . .

  4. Fred commented on Oct 9

    Very interesting Barry…thx.

    (Somewhat off topic)…from Tony C:

    “the total amount of real estate loans outstanding at the nation’s commercial banks reaching a record $3.486 trillion in the week ended Sept. 26. The figure has been increasing at a faster pace of late, increasing at a 17.2% pace over the past six weeks compared to an 11.3% pace over the past four years”

  5. Das Gherkin commented on Oct 9

    I had a dream that “the powers that be” orchestrated a mini-crash between now and the end of the month to make the case for another rate cut on Oct 31st ( since the eco date is kind of ambivalent )…and, of course, I played it perfectly.

    Boy, did I clean up.

  6. Graffiti Grammarian commented on Oct 9

    Florida is correct.

    The end of the world is “nigh,” causing horses the world-over, no doubt, to neigh.

  7. lurker commented on Oct 9

    It’s those darn horsemen of the apocolypse…they can never get their mounts to shush the heck up….LOL

  8. foo commented on Oct 9

    While the index is proprietary, any semi-competent analyst could produce something correlated based on the description (unless he uses some wierd definition of risk-adjustment or momentum):

    “risk adjusted price momentum measure between global equities and global bonds”

  9. Moose commented on Oct 9

    James was/is the best European strategist. Very insightful.

    What wall? What worry?

  10. PeterR commented on Oct 9

    The indicator seems to swing wildly even within one year. For instance in early 2002 the high of about 1.3 swung to a low of about -3.5.

    This high suggests an annual return of 2% and the low a return of 14% ??? Obviously these average returns do not apply to all the highs and lows on the chart.

    Maybe a smoothed average would produce cleaner (more tradable?) highs and lows?

    The recent high of about 2.5 would suggest a tradable market high with an annual return of 2% vs. cash (at what percentage rate return?)

    The spikes up in 1996 and 1997 indicated equity sell points? The market rallied furiously until 2000 +/-.

    Hmmmmm, how useful is this indicator?

  11. Woodshedder commented on Oct 9

    Peter, well, not very useful, obviously. However, I do like that in the midst of this bull run, it is reading normal.

    BR, did you not notice it was saying that everything is ok? ;)

  12. Globalized commented on Oct 9


    Not sure I’d say that. I have no idea how useful this indicator might be but I do notice that every peak or “double peak” seems to be followed by a trip down to the fear line before the next peak – at least prior to 2003. On the other hand, the dips since ’03 seem to suggest that fear ain’t what it used to be. Hmmmm.

  13. blam commented on Oct 10

    Unless the damn thing changes direction, it looks like it’s on it’s way to the place where equities are a whole lot chipper.

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