Happy Labor Day Weekend to You and Yours!

 

Watch out–there are bears everywhere.

 

After 35 years, I swear I have never seen anything like it.  Pretty stunning – but then again, most investors are too worried about the next shoe to drop to see the good stuff.

 

Stats Please?

Note the red dot – it is the current week’s reading of the percentage of Bulls in the crowd.

 

Just 25%

 

Meaning 75% are not bullish, are feeling “neutral” (which is French for “terrified but afraid to admit it”) or outright bearish!

 

I want you to also note that over 95% of all other readings in this data were above current levels.

 

From a contrary perspective – this is very bullish data.  The time you want to be concerned is after months of everyone being too bullish.  We are miles and miles and miles away from that today.

 

Want this week’s bearish stats?

Once again – the red dot.  Showing just a tad bit under 40%.  Meaning?

 

Four out of ten are outright bearish

Seventy-five out of 100 are not bullish

 

Study these charts – carefully.  At no time in this data has this level of bearishness and the nearly extinct level of bullishness preceded a major top.

 

This is what usually comes AFTER a sell-off, not before it.

 

Some Context

 

March 9, 2009.  DOW below 7,000.  Ugly bear market of 2008-2009 reaches its low. Great Recession is clouding the horizon.  There were so many government rescue program acronyms being created, one was mesmerized by all the names.   The end of the word had arrived.  Life as we knew was over.  The financial system kaput.

 

The level of bulls that week at the low?

 

19.7%  (less than 6% away from where we are now)

 

At the time, we also set a record for the amount of cash sitting in the bank held by consumers.  It was a staggering $4.3 Trillion at the time.

 

Today?

 

DOW 22,000 (give or take a few hundred points).  Record earnings, record cash flows, record GDP.  Most employed citizens ever in the workforce.

 

And what do we have?

 

Bullish percentage in the crowd:  25%

And now over $10 Trillion in cash in the bank

 

Oh, and how could I forget – the best fear trade of all – bonds.  They stand near record low yields with an avalanche of buyers at each auction.

 

And get this – it is all happening even as P/E’s in the market actually FELL in the latest Q2 earnings analysis:

There is more.

 

ISM’s were better than expected (again):

And all those retailers everyone was worried about?  Well, their earnings were nowhere near as bad as assumed by the experts.  Meanwhile, retail sales pace is doing just fine thanks:

Before I close out and stop rambling for the long weekend, let me give you a really big reality check.

 

Bond rates have now gotten so low (read:  fear has gotten so deep) that the earnings yield on the S&P 500 exceeds the yield on bonds!

What Does It All Mean?

 

It means we are in fantastic shape for long-term investors.

 

Hey I know this is confusing and the summer haze has been tough on everyone.  Chop and churn and in the end, making very little headway.

 

But as I noted before the summer began, “we can be assured a lot of chop will bring back the bears quickly – and that helps set the stage for the continuing surprises to the upside.”

 

And we have done just that – the bears are back in droves.  They outnumber the bulls by a wide margin.  So, hope for a little more chop.  When we pass the seasonal weak spots on the calendar, the stage will be set with a solid undertone of fear.

 

The oldest tool in the stock market war chest:  the wall of worry.

 

Don’t become a part of it – benefit from it instead.

 

Stay focused on the Barbell Economy and demographics.

 

Have a wonderful Labor Day Weekend break.

We wish you and yours the best the long weekend can offer!

Until we see you again, may your journey be grand and your legacy significant.