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Dr. Paul Price
Dr. Paul Price
Articles (513)  | Author's Website |

The Most Hated Bull Market in History?

December 03, 2013 | About:
The Lonely Bull

You can’t win if you don’t play.


Bearish forecasters point out that small investors have been net buyers of equity mutual funds over the past few months. They claim that might be signaling a market top.

Mom and Pop are usually wrong at key turning points. Those who know stock market history, though, aren’t likely to be worried by that particular factor right now.

Gallup just released its 2013 update as to the percentage of American adults who directly, or indirectly, own stocks.

This year’s reading set a new millennial low at just 52%.

250644960.jpgWhen the DJIA set its previous record, in 2007, the number registered 25% higher, at 65% of the adult population. Many of the indicated holders have smallish stakes only via work-related 401ks.

The Crash of 2008 to 2009 was scary enough to induce selling at the bottom. It was traumatic enough that many individual investors continued to lighten their equity holdings on every rally up until quite recently.


Perhaps that is why the traditional "wealth effect" has failed to stimulate America’s economy. It is certainly why this is the most hated bull market in memory.

If you cashed out low it is galling to realize how much that mistake cost you. If you never owned stocks it is just one more proof of income inequality. The rich get richer while the average man is earning ZILCH under Bernanke’s ZIRP.

Valuations are no longer cheap, but they are not especially dear. The public has shown little enthusiasm for stocks based on their real money investment allocation.

Bonds look more vulnerable to decline than do equities even as they offer some of the worst yields in most of our lifetimes.

Fear of higher interest rates appears misplaced. With the national debt now over $17 trillion Washington owes so much money that the Fed will be directed to keep rates artificially constrained.

Whether you like it or not, today's market is just like Obamacare. You can either participate voluntarily, or you’ll be charged a penalty for not buying.

Stick with stocks.

About the author:

Dr. Paul Price


Visit Dr. Paul Price's Website

Rating: 3.0/5 (9 votes)



AlbertaSunwapta - 3 years ago    Report SPAM
I'd be curious what percentage of individual investors will be near permanently out of the market due to being wiped out in the crisis or exiting the market for the long term real estate opportunities. In the 1920s investment trusts were all the rage for small investors. It wasn't until the 1970s when I started investing that they really came back strong, being renamed as mutual funds. Of course, in the intervening years most core investors had long been in the markets, however they too were gun shy through much of the 1930s and 1940s.

"Fear of higher interest rates appears misplaced. With the national debt now over $17 trillion Washington owes so much money that the Fed will be directed to keep rates artificially constrained. " Pretty much exactly what Arnold Van den Berg predicted a number of years ago. Nonetheless, much of the benefit from ZIRP occurs in getting to ZIRP and not in sitting with ZIRP. From there, in today's global markets, exchange rates (FX movements ) then become a central mechanism so my attention has shifted to watching, or more accurately, waiting, for issues that might blindside the bull market.

Additionally, while I can imagine rates fluctuating at a low level for a while (I once inherited a few hundred dollars worth a GofC 3.75%? perp. that they successfully issued in '37) it's hard to imagine the Fed forever promising to take up market slack by adding to its book. As such the market's discount rate selection may be highly variable going forward. Which is good, as "volatility is the friend of the investor".
JUDS1234567 - 3 years ago    Report SPAM
Regardless of whether we have remain invested or not since 2009, the fact is that we are almost guaranteed 0% returns or something sub-par from here. The only way for further gains is multiple expansion, not the way to bet in my opinion. And that's what it is here, speculation.
AlbertaSunwapta - 3 years ago    Report SPAM
^ "the fact is that we are almost guaranteed 0% returns or something sub-par from here" I wouldn't say that. All I can say is that by a growing number of market metrics the market is is no longer as cheap as it previously was and by some it is overvalued compared to historical data. Also, markets have historically turned downwards every few years and it's been a few years since the last bottom.

That said, there's nothing saying that good times (or prices) can't get better and better (or go from bad to worse for that matter). While we count on a regression to the mean (compounded - nonlinear) sometimes the future doesn't cooperate.

Morgan Stanley’s Adam Parker: The Most Bullish Strategist on Wall Street - MoneyBeat - WSJ

“Economically stronger China and Japan could also help. In fact, it isn’t preposterous to say that we could be in an environment of synchronous global economic expansion in 2014, and tapering or not, that isn’t fully in today’s prices.”

Shaved_head_and_balls - 3 years ago    Report SPAM
Who hates the bull market? CNBC pundits? Cramerica? NYSE margin users ( at all-time high level)? AAII? Mutual fund equity inflow? I'm guessing that the author has recurring nightmares about stock market haters chasing him every night. This article is the type of hubris that marks a bull market's final stage--whether two weeks or two years. The "public" has never shown much interest in stocks. A minority of affluent people own the overwhelming majority of stock value. "you’ll be charged a penalty for not buying" This sounds like a desperate realtor trying to close the sale on an overpriced, unwanted house.
Shaved_head_and_balls - 3 years ago    Report SPAM
No way to delete repeat posts?
Dr. Paul Price
Dr. Paul Price - 3 years ago    Report SPAM
Shaved-head, The penalty for not buying = no interest on cash when true 'cost of living' inflation is in the 8%-12% area - not the BS CPI-U reported by the BLS. Keeping money in fixed income has been the big loser - not stock ownership. Those who played the game are way ahead. People who sat in cash, bonds or even worse, went to gold, have been killed in terms of preservation of inflation-adjusted wealth.

Those who have been waiting for the next 2008-type crash to buy into stocks cheaply are the biggest real haters of the current bull market.
LwC - 3 years ago    Report SPAM
"…true 'cost of living' inflation is in the 8%-12% area - not the BS CPI-U reported by the BLS."

Still pumping John Williams's ShadowStats version of CPI, huh?

Regression to Trend: Debunking the Alternate CPI By Doug Short March 24, 2013


Aternate-CPI.php The Trouble With Shadowstats

Vgm - 3 years ago    Report SPAM
There's plenty to support the title and thesis of this piece - including Howard Marks' view that equities are "under-owned and under-loved" as well as the alleged $1T+ sitting on the sidelines. I think many investors have been suffering from so-called 'recency bias' based on the trauma of 2008/9.

After the huge bullrun in the past 4/5 years, going forward the market will likely not produce outsized returns, though perhaps 0% is an exaggeration. But that will not necessarily be the fate of good value investors who are capable of thinking not only differently from the crowd, but differently AND better (a necessary condition for outperformance as Marks instructs us). Stock by stock valuation is the key.

Bargains are few and far between at the moment, but I'm happy holding my major positions in companies which were bought at much lower prices than today's, but which I believe still have a solid future - DTV, DVA, BAC, CHK, IRE, LYG - over a 3-5+ year period.

I think I'm in good company. People of the caliber of Ted and Todd at Berkshire will not be selling out of positions like DTV and DVA, nor Prem Watsa and Wilbur Ross out of IRE, if the market has the widely-anticipated correction or pullback.

Of course, many have been predicting a correction for a year or more while the markets were (again to quote Howard Marks) "very cheap".
Shaved_head_and_balls - 3 years ago    Report SPAM
Paul Price: Last week the percentage of bearish investment advisors was 14.3%, the lowest level in 25+ years. Are those 14.3% the stock market haters that you see lurking on every dark street corner? The performance of long Treasury bonds from November 1981 to November 2011 outperformed the S&P 500--with a fraction of the risk. The phrase "the penalty for not buying" evokes memories of the bubble hucksters of 1999 and 2007. Seth Klarman has 30-40% cash. Are you smarter than he? Then show us your audited track record. What's really hated is a 10-year Treasury with a 2.85% yield. Ironically, the 10-year Treasury will likely outperform the stock market from today through the end of the next bear market. Those who don't understand this lack detailed knowledge of market history.
Shaved_head_and_balls - 3 years ago    Report SPAM
vgm: Marks admitted that he failed to predict the greatest "global financial crisis of multi-generational proportions". In fact, he merely noted "carelessness-induced" and "worrisome" behavior. Is his recent upbeat view of equities therefore valuable? If Marks is so sanguine on equities, why would he have written the following statement very recently: "I have no doubt that markets are riskier than at any other time since the depths of the crisis in late 2008 (for credit) or early 2009 (for equities), and they are becoming more so." Wait...I know...it's because "This is the most hated bull market in history." That's right. Money managers hate the stock market, and they can't look themselves in the mirror for leveraging up to the eyeballs to own it. The hate it like a junky claims to hate heroin.
Shaved_head_and_balls - 3 years ago    Report SPAM
vgm: Marks is good at distressed debt. Stocks is not his forte.
Vgm - 3 years ago    Report SPAM
Shaved -- you pose questions and provide your own answers. Well, that's one way to be right (I guess).

Agree Howard Marks is not mainly in equities. But he's one of the most shrewd and risk-averse participants and observers around. And I'd argue that his involvement across other parts of the financial structure give him an improved view of the landscape. The financial world is inter-connected. His 2007 Memo entitled Race to the Bottom was particularly prescient. His recent 2013 Memo, The Race is On, is a warning of what might be coming down the track.

You bring up Seth Klarman, but forget to mention he is also not mainly in equities. Seth made more money than god in debt instruments coming out of the crisis and is now sitting on a cash pile. He's long said he'd be giving cash back to his investors in order to keep his fund at a level where he can deliver for his clients.

It so happens that on the same day Marks was interviewed recently (Nov 19), Buffett was also interviewed. They had remarkably similar views that the market had come up a long way from the bottom, and was quite fully valued, but that valuations are not stretched. Importantly, and despite the many bubble-criers, there's no bubble.

As has been repeated in other threads, now is a time to be cautious and double check our valuations.

Thanks for responding. Opposing views which challenge our own are very welcome at this time.

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