Monday, December 2, 2013

Monday noontime reading

Here's some stuff I happened across that you might like to take a look at:

Reformed Borker (Bork Bork Bork!) - Wall Street still hates stocks. his is a must-read for anyone out there who has any interest in using sentiment indicators in a contrarian manner:
[The Sell-Side Indicator has] been an incredibly good contrarian indicator. While it does not catch every bottom or top, the indicator has a higher r-squared (28%) than just about any other you can think of in terms of predicting subsequent 12-month returns for the S&P 500. Anecdotally, this pessimism-as-base-case on Wall Street has been one of the best tells to stay long (here’s me in the summer of 2012 highlighting it).
Here's the comparison chart showing correlations for each indicator:
Seriously? The Sell-Side Indicator has a significantly higher r-squared than either dividend yield or PE? Really? Tell me more, Joshua you handsome fat bastard!:
So where are we on the sentiment scale relative to the past? Subramanian notes that, while the Sell Side Sentiment index now sits at a 19-month high (up 12 of the last 15 months), we are still in “Buy” territory with stocks still way too forsaken and close to their 2009 sentiment lows. The strategist says “Historically, when our indicator has been this low or lower, total returns over the subsequent 12 months have been positive more than 95% of the time, with median 12-month returns of +27%.” The indicator’s current level would indicate an expected return for the S&P 500 of 18% in the next 12 months, based on the report.
There is of course an obvious caveat that backtesting means nothing.

However, the sell-side indicator's correlation factor is way higher than any other bullshit sentiment factor. And maybe for good reason: markets don't top til everyone's done buying, and this indicator vaguely reflects how many people are done buying.

Ask your local TA/sentiment "analyst", by the way, if he ever took a proper stats course. I'd think it has to be mandatory, but you never know.

FT beyond brics - PMIs offer further signs of CEE recovery. This for the guy who talked about investing in Poland.

Junior Gold Miner Seeker - long term chart of the Venture. Apparently stimulated by an Eric Coffin presentation, which he links to. The chart gives you an idea of how long you might have to wait til the next party.

Jesse's Crossroads Cafe - Crimenex registered gold inventory levels. In which he provides this chart:

Which does look rather interesting, since it means there are a heck of a lot more gold contracts out there than there are ounces of gold to cover them. I don't want to turn into a Zerohedger here, but it truly does look rather interesting; especially if the open interest is mostly short, no?


  1. Yardeni examines the assumptions of permabears

    1. Assumption #1: Democrats destroy the economy and black Democrat presidents named HUSSEIN destroy it even worse.

      That's basically it.