Source: Bank of America, Merrill Lynch
A Reliable Contrarian Indicator
July 2, 2015 1:00pm by Barry Ritholtz
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The Ten Harsh Financial Commandments
Look interesting but I don’t trust the sources.
It’s one metric, but their research team is first-rate.
So the data only goes back to 1985. Since we’re looking at the end of a secular bear market, wouldn’t the data from the late 70s and early 80s be useful?
Everybody is bearish but mutual funds’ equity allocation is near all time high, and cash near all time low.
Suggestions:
1. Pay attention to what they do, not what they say.
2. When the trend turns (and despite what Draghi and Yellen keep promising, it will turn) people will channel this extreme fearfulness into an avalanche of sales, which, coupled with MoMo algos and HFTs may very well cause 1987-like event.
Well, that might have helped caution folks from buying boatloads of Webvan in late-1999, but I think I’d have to get a much better look under-the-hood of this chart before I used it to influence investment planning.