Are You Missing the Great Bull Run?

New Investor Center - This content requires the free Adobe Flash player.

In one of the biggest rallies in recent history, the pros have played, but the masses have stayed home. It's not too late to climb aboard, however.

Psst. Hey, buddy, did you hear it was a bull market?

You would never guess it from all the pessimism you hear around the dinner table or the office, but stocks are on their strongest run in more than a generation. The Standard & Poor's 500 Index ($INX) has climbed about 80% since March 2009 -- the largest and fastest gain since at least 1960, according to the folks at Lowry Research. Smaller, riskier stocks are up more than 112%.

What is behavioral investing?

Sure, there have been other similarly steep rallies off market bottoms. Examples include comebacks in 1962, 1974, 1982, 1990, 1998 and 2003. But these were typically in the range of 30% to 40%. The best of the bunch was the 1982 rally, which produced a gain of 62% over 14 months. Msn.Video.createWidget('PlayerAd1Container', 'PlayerAd', 304, 314, {"configCsid": "MSNmoney", "configName": "player-money-NIC-articles-inline", "player.vcq": "videoByUuids.aspx?uuids=1f16a8ca-4a29-474f-992f-e47b4773c974,8c0054a4-8055-4d0a-9aa9-5e02ab926755,3013e95d-f2ec-40db-b17d-836abe1b5cce,4e3e5e17-73dc-4fa4-a5f8-36163467c770,aebc6790-08eb-4839-8137-55f73e404127,58deda83-6ed8-4e28-a249-c9b8d2c14025,0183a993-ec21-4fc4-b8f6-4f9a0ad91b0a,c2b06714-9a03-422c-88c6-1f3ba32337d0,d0340f5a-5bc0-43dc-8741-3293e5e7ef10", "player.fr": "iv2_en-us_money_article_NIC-are-you-missing-the-great-bull-run-inline"}, 'PlayerAd1');Msn.Video.createWidget('Gallery4Container', 'Gallery', 304, 150, {"configCsid": "MSNmoney", "configName": "gallery-money-articles", "gallery.linkbackLocation": "bottom_left", "gallery.numColsGrid": "3", "gallery.categoryRequests": "videoByUuids.aspx?uuids=1f16a8ca-4a29-474f-992f-e47b4773c974,8c0054a4-8055-4d0a-9aa9-5e02ab926755,3013e95d-f2ec-40db-b17d-836abe1b5cce,4e3e5e17-73dc-4fa4-a5f8-36163467c770,aebc6790-08eb-4839-8137-55f73e404127,58deda83-6ed8-4e28-a249-c9b8d2c14025,0183a993-ec21-4fc4-b8f6-4f9a0ad91b0a,c2b06714-9a03-422c-88c6-1f3ba32337d0,d0340f5a-5bc0-43dc-8741-3293e5e7ef10;videoByTag.aspx%3Ftag%3Dmoney_dispatch%26ns%3DMSNmoney_Gallery%26mk%3Dus%26vs%3D1;videoByTag.aspx%3Ftag%3Dbest%2520of%2520money%26ns%3DMSNmoney_Gallery%26mk%3Dus%26vs%3D1"}, 'Gallery4');But this precocious new bull market just can't win many fans. Despite the promise of stock market riches, everyday investors have been sitting on the sidelines. When they have invested, their money has gone into safer, less exciting bond funds.

And while there has been some evidence recently that Main Street was belatedly joining Wall Street's party, that was before the Securities and Exchange Commission charged Goldman Sachs (GS, news, msgs) with fraud. Bankers are now testifying almost daily on TV, igniting new rounds of headlines that express the fear that's keeping many away from stocks: Is the game rigged?Simply soured on stocks A glance at a newsstand reveals popular sentiments about stocks and shows how far away we are from the ebullience of the tech- or housing-bubble years. The current issue of Money magazine explores health care reform and ways to protect your portfolio. Forbes profiles conservative Glenn Beck and prepares readers for tax hikes. And SmartMoney recommends seven income-boosting strategies and the world's best annuities.

Not one mentions stocks on its cover.

Indeed, an AP-GfK poll (.pdf file) from early April shows that a majority of respondents believe it's a bad time to invest in stocks. By a wide margin, those polled say that real estate is a better investment. A Gallup poll from the same period indicated that just 22% of Americans believe stocks are the best long-term investment now -- up from a low of 15% in 2009 but down from a peak of 31% in 2007.

Investors are sure putting their money where their mouths are.

Brad Durham of EPFR Global notes that since January 2007, U.S. equity mutual funds have lost $83 billion, while U.S. bond funds have gained a whopping $425 billion.

Since stocks bottomed in March 2009, retail investors have pulled $82 billion from U.S. equity funds while putting $93 billion into bond funds -- during a period that government bonds have yielded a total return of minus-5% compared with the 80% gain for stocks.

As a result, total allocation to stocks by U.S. households has fallen to levels not seen since the early 1990s.

But this story has another half: the big difference between Main Street investors and Wall Street pros. Since the March 2009 low, institutional traders have added $25 billion to equity funds; since 2007, they've added a total of $198 billion. So while the average Joe was selling, the pros were buying. Who's right? Either the public is correct in avoiding stocks, or the professionals are onto something big. And history comes down clearly on Wall Street's side. The average investor has a terrible record of predicting stock market movement. Studies by academics and practitioners all come to a similar conclusion: Retail investors are horrible market timers, frequently buying into an overpriced market and selling into an oversold one.

The battle between Wall Street insiders and average investors reaches deep into history. The promise of fortune has led many amateur speculators into the jaws of professional operators. Repeatedly, teachers, waiters and bookkeepers have plunged their capital into stocks just as the veterans were cashing out. Then, after one of the many and inevitable panics ensued, the pros would quietly buy back their positions cheap and pocket the difference, while the amateurs frantically sold and took their losses.

Whether it involved United States Steel (X, news, msgs) in 1901, IBM (IBM, news, msgs) in 1962 or Dell (DELL, news, msgs) in 2000, the game was the same. It's happened before. And it's happening again.

The question is: Where in this pattern are we now?

There are signs that retail investors are just now starting to return to the stock market. This will eventually lead to tears as speculative overexcitement gives way to a new bear market, but not yet. First, we should see an upward whirl of fast-rising stock prices as more and more investors jump in, along with dizzying valuations.

We've seen prices rise, but we haven't seen the money pour in. We may be seeing the start of that rush now, though.

Continued: Greed taking the upper handMore from MSN Money

Why your paycheck might be going up

AT&T vs. Verizon: Which stock is better?

Why inflation would be good for us

How to tell when the recession is over

The key ingredient of market bubbles

 1 | 2 | next >

Rate this Article Click on one of the stars below to rate this article from 1 (lowest) to 5 (highest). LowThank you for rating.UGR('ratCntrl')High var avgRating=0;avgRating=6.901961; if(avgRating!=0){avgRating=avgRating/2;avgRating=Math.round(avgRating*100)/100;var sDisplayText="Average rating: " + avgRating + " from ";var usersCount=51;sDisplayText = sDisplayText + usersCount;if (usersCount==1)sDisplayText=sDisplayText + " user";else sDisplayText=sDisplayText + " users";avgRatingElem=document.getElementById("averageRating");avgRatingElem.innerText=sDisplayText;} View all top-rated articlesE-mail us your comments on this article Discuss in a message board Cool ToolsMarket DispatchesTop Stocks blogQuote WatchlistTechnical AnalysisResearch Wizard StockScouter RatingsPick a brokerGlossary Search

Need answers fast? Find definitions for investing or financial terms.

Enter a term:Go to the New Investor Center Article IndexMsn.Flash.Build('http://blubedbuia01:83/i/BB/CA237289BFB4368EB4C4EA8225B66.swf', '9', 110, 159, 'button',{allowScriptAccess:'always'});Recent Articles by Anthony MirhaydariWhy your paycheck might be going up 04/23/2010AT&T vs. Verizon: Which stock is better? 04/19/2010Why inflation would be good for us 04/13/2010Msn.Video.createWidget('Gallery8Container', 'Gallery', 500, 230, {"configCsid": "MSNmoney", "configName": "gallery-money-article-site-wide", "gallery.categoryNames": "New%20Investor%20Center;Top%20Picks;Market%20News;Most%20Watched%20Today", "gallery.categoryRequests": "videoByTag.aspx%3Ftag%3Dmoney-campaign_new-investor%26ns%3DMSNmoney_Gallery%26mk%3Dus%26vs%3D1;videoByTag.aspx%3Ftag%3DBest%2520of%2520Money%26ns%3DMSNmoney_Gallery%26mk%3Dus%26vs%3D1;videoByTag.aspx%3Ftag%3DMoney_Dispatch%26ns%3DMSNmoney_Gallery%26mk%3Dus%26vs%3D1;videoByTag.aspx%3Fmk%3Dus%26sf%3DDailyCount%26st%3D1%26ns%3DVC_Supplier%26tag%3DMSNmoney%26vs%3D0", "gallery.categoryTabs": "New%20Investor%20Center;Top%20Picks;Market%20News;Most%20Watched%20Today", "gallery.defaultTab": "New%20Investor%20Center", "gallery.fg": "gallery_site_wide_articles-NIC", "gallery.from": "en-us_msnmoney-site-wide-gallery-NIC", "gallery.linkback": "http://articles.moneycentral.msn.com/learn-how-to-invest/new-investor-center-video.aspx", "gallery.linkoverride": "http://articles.moneycentral.msn.com/learn-how-to-invest/new-investor-center-video.aspx?cp-documentid=", "gallery.permalink": "http://articles.moneycentral.msn.com/learn-how-to-invest/new-investor-center-video.aspx?cp-documentid="}, 'Gallery8');Fund data provided by Morningstar, Inc. © 2009. All rights reserved.StockScouter data provided by Gradient Analytics, Inc.Quotes supplied by Interactive Data.MSN Money's editorial goal is to provide a forum for personal finance and investment ideas. Our articles, columns, message board posts and other features should not be construed as investment advice, nor does their appearance imply an endorsement by Microsoft of any specific security or trading strategy. An investor's best course of action must be based on individual circumstances.msft.msn._ic.cid='pq5v9ucktht7jiqr3s5rpnff2ie9ajk9';msft.msn._ic.pst=false;msft.msn._ic.pgn=1; Join the discussion!Add a commentShow commentsSort by:Newest firstOldest first_uc2f12('iucGo');1 - 4 of 4PreviousNextmike7055 #1Wednesday, April 28, 2010 8:40:55 PMHi Anthony, how do create a chart like the one above (NYSE Advance Decline Issues (EOD) Index)?ReplyReport Abusedbellis #2Wednesday, April 28, 2010 10:05:34 PMAgree. The average Joe absolutely sucks at investing. The naysayers have been clogging up these boards for months trying to talk down the market. Unable to admit they are wrong - they have locked in their losses. Even when we do have that pullback they will insist that it is the beginning of the end and repeat their failure all over again. These same people were more than happy investing at the top in 2007 though. Of course, they blame it on the "crooks" on wall street. Kind of quiet now isn't it?ReplyReport Abusedisillusioned101 #3Thursday, April 29, 2010 1:31:25 AM

Around and around and around she goes where she stops only a few insiders know. Place your bets folks. The casino is open. Take advantage of the low volume sucker rally. Buy at the top, Grandma Sachs needs a new car.

 

 

ReplyReport AbusenewjiangleiZ #4Thursday, April 29, 2010 2:15:36 AMW_ealthy and R_ich   It's w_here romanc_ing w_ith the r_ich s_ingle_s!!!!ReplyReport Abuse1 - 4 of 4PreviousNext_ucf13('0'); _iuc2Om1('MSNPortalInlineComments','Initial_Load_Comment_View','http://articles.moneycentral.msn.com/learn-how-to-invest/are-you-missing-the-great-bull-run.aspx?','en-us');Are you sure you want to delete this comment?Report AbusePlease help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease notify us using the Report abuse form below. We will investigate your report and take appropriate action against offenders. We report all illegal activity to authorities.CategoriesSpam or advertisingChild pornography or exploitationProfanity, vulgarity or obscenityCopyright infringementHarassment or threatOtherAdditional comments(optional)100 character limit To add a comment, pleasesign inMSN privacyLegalAdvertiseRSSHelpFeedbackSite mapAbout our ads© 2010 Microsoft

And while there has been some evidence recently that Main Street was belatedly joining Wall Street's party, that was before the Securities and Exchange Commission charged Goldman Sachs (GS, news, msgs) with fraud. Bankers are now testifying almost daily on TV, igniting new rounds of headlines that express the fear that's keeping many away from stocks: Is the game rigged?Simply soured on stocks A glance at a newsstand reveals popular sentiments about stocks and shows how far away we are from the ebullience of the tech- or housing-bubble years. The current issue of Money magazine explores health care reform and ways to protect your portfolio. Forbes profiles conservative Glenn Beck and prepares readers for tax hikes. And SmartMoney recommends seven income-boosting strategies and the world's best annuities.

Not one mentions stocks on its cover.

Indeed, an AP-GfK poll (.pdf file) from early April shows that a majority of respondents believe it's a bad time to invest in stocks. By a wide margin, those polled say that real estate is a better investment. A Gallup poll from the same period indicated that just 22% of Americans believe stocks are the best long-term investment now -- up from a low of 15% in 2009 but down from a peak of 31% in 2007.

Investors are sure putting their money where their mouths are.

Brad Durham of EPFR Global notes that since January 2007, U.S. equity mutual funds have lost $83 billion, while U.S. bond funds have gained a whopping $425 billion.

Since stocks bottomed in March 2009, retail investors have pulled $82 billion from U.S. equity funds while putting $93 billion into bond funds -- during a period that government bonds have yielded a total return of minus-5% compared with the 80% gain for stocks.

As a result, total allocation to stocks by U.S. households has fallen to levels not seen since the early 1990s.

But this story has another half: the big difference between Main Street investors and Wall Street pros. Since the March 2009 low, institutional traders have added $25 billion to equity funds; since 2007, they've added a total of $198 billion. So while the average Joe was selling, the pros were buying. Who's right? Either the public is correct in avoiding stocks, or the professionals are onto something big. And history comes down clearly on Wall Street's side. The average investor has a terrible record of predicting stock market movement. Studies by academics and practitioners all come to a similar conclusion: Retail investors are horrible market timers, frequently buying into an overpriced market and selling into an oversold one.

The battle between Wall Street insiders and average investors reaches deep into history. The promise of fortune has led many amateur speculators into the jaws of professional operators. Repeatedly, teachers, waiters and bookkeepers have plunged their capital into stocks just as the veterans were cashing out. Then, after one of the many and inevitable panics ensued, the pros would quietly buy back their positions cheap and pocket the difference, while the amateurs frantically sold and took their losses.

Whether it involved United States Steel (X, news, msgs) in 1901, IBM (IBM, news, msgs) in 1962 or Dell (DELL, news, msgs) in 2000, the game was the same. It's happened before. And it's happening again.

The question is: Where in this pattern are we now?

There are signs that retail investors are just now starting to return to the stock market. This will eventually lead to tears as speculative overexcitement gives way to a new bear market, but not yet. First, we should see an upward whirl of fast-rising stock prices as more and more investors jump in, along with dizzying valuations.

We've seen prices rise, but we haven't seen the money pour in. We may be seeing the start of that rush now, though.

Continued: Greed taking the upper handMore from MSN Money

 1 | 2 | next >

Need answers fast? Find definitions for investing or financial terms.

Around and around and around she goes where she stops only a few insiders know. Place your bets folks. The casino is open. Take advantage of the low volume sucker rally. Buy at the top, Grandma Sachs needs a new car.

 

 

Read Full Article »