Thursday, January 10, 2008

More Signs Of The Negativity Bubble

In case you didn't see the AAII survey today, allow me to relay:

The percentage of bulls dropped to 19.6% this week, from 25.7% last week. The percentage of bears rose to a whopping 58.9%, from 55.2% last week.

This level of bears has not been seen since October 1990, after Iraq invaded Kuwait and the US was gearing up for 'Desert Strom'.

I continue to see many signs of a negativity bubble, this survey among them. I also believe that investor sentiment is sufficiently negative to prevent a damaging bear market from ensuing, despite the prospects of recession.

I don't think I'm being pollyannish. I acknowledge that the market is in a rough patch currently, and it could take many months to break out from it.

But with valuations at reasonable levels, trillions of dollars on the sidelines, bearish sentiment spiking, and monetargy growth accelerating, I think the downside risk is limited.


Post a Comment

<< Home