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Is Everyone Really Bullish?


Bottom-calling only seems to have increased.

No matter where you turn - TV, the Internet - it seems there's someone, somewhere, looking for a low. And if "everyone" is looking for that low, then it's less likely to happen, right? We didn't see that during the last bear market, supposedly, which makes this one that much worse.

Well, that may be true, but we're not comparing apples to apples. What's different is that everyone had an opinion before, but they didn't have the means to express it.

Consider the growth in blogs indexed via Technorati. They show that, as of March 2003, there were about 200,000 blogs. Near the end of 2004, there were over 4,000,000. As of 2008, there were more than 7.4 million that had been updated during the past 6 months.

And then there's Twitter. The mini-blogging service began in 2008, with about 500,000 monthly visitors. At the end of the year, there were 4,500,000. It's gone parabolic since then.

This means that it is easier than ever for someone, anyone, to post their opinion, and people have come out of the woodwork to do so. At any given time, it doesn't mean investors are any more or less of one mind than they were before, it's just that now we see it.

As for TV, well now there are three business channels instead of one. Flip on the tube, and there's going to be someone, on one of them, that confirms what "everyone" on the blogs or twitter is saying.

The odd part is that everyone really isn't talking about bottoms, even though it seems like they are. Consider this chart from Google Trends, showing the popularity of the word "bottom" among the sites it searches:

Granted, some of those could refer to a search on J. Lo, but many of the stories relate to the stock market. It doesn't seem like a particularly big spike lately; in fact, it's well off the highs from 2008.

Anyway, we all know that what someone says can be vastly different from what they do.

Using real-money gauges, if "everyone" was bullish, would we really see inflows to bullish Rydex funds near their lowest levels ever? Would we really see cash stuffed in money markets at all time highs relative to stock market cap? Would we really see inverse ETF volume at the upper end of its range?

No, we wouldn't. Be careful about drawing opinions based on anecdotal evidence gleaned from mediums that didn't exist during the last bear market.
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