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Mark Hulbert
April 30, 2010, 12:01 a.m. EDT · Recommend (5) · Post:
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At Viacom, is content still king?
By Mark Hulbert, MarketWatch
ANNANDALE, Va. (MarketWatch) -- These are times that try contrarians' souls.
Maddeningly, it's unclear whether the mood out there is too positive (which would be bearish), or too negative (which would be bullish).
On the one hand, individual investors remain profoundly skeptical of the stock market. Domestic equity mutual funds, for example, over the last year have actually suffered a net outflow. That's extraordinary, since the usual pattern is for investors to pour huge amounts of new money into the stock market in the wake of rallies as strong as the one we've experienced over the last year.
Furthermore, according to the latest data for April, there is no sign that this trend is about to change. (Read my Apr. 27 column).
On the other hand, investment advisers are bullish right now -- more bullish, in fact, at least by some measures, than they have been in a decade.
Since I devoted a column earlier this week to discussing the mutual-fund flow data, I'm focusing this column on the data showing the mood to be too optimistic.
Consider the Hulbert Nasdaq Newsletter Sentiment Index (HNNSI), which represents the average recommended stock market exposure among a subset of short-term Nasdaq market timers tracked by the Hulbert Financial Digest. This is a useful sentiment measure on which to focus, since the Nasdaq market is one in which sentiment plays a particularly large role (remember the Internet bubble)?
The HNNSI's latest level, at 80%, is dangerously high.
To put this current level of bullishness into perspective, consider that the HNNSI as recently as early February -- at the depths of the January-February stock market correction -- stood at minus 16.1%, or 96 percentage points below where it is today. That represents an extraordinary swing in sentiment for just 2-1/2 months.
In fact, to find another occasion on which the HNNSI was any higher than where it stands now, you have to go back to July 2000, almost 10 years ago. That earlier occasion, need I remind you, came just as the Internet bubble was unraveling and the mood was still quite giddy.
How can a contrarian resolve the inconsistent messages of the mutual-fund flow data and the investment advisory sentiment data?
One way might be to view the advisory sentiment data as having more short-term significance. This helps to make sense of the data, since the mutual-fund flow numbers have painted a largely consistent picture over the last 12 months of investor skepticism, while the sentiment measures based on investment advisers have fluctuated widely -- on the whole, reaching peaks of optimism before the market fell, and reaching troughs of despair before the market rose.
What might this mean for interpreting the sentiment data today? Given the profound skepticism towards the rally among fund investors, the bull market should be given the benefit of the doubt.
However, given the extreme optimism among investment advisers, the odds of a short-term correction are now dangerously high.
Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980.
Mark Hulbert is editor of the Hulbert Financial Digest, which since 1980 has been tracking the performance of investment advisory newsletters. The HFD became a service of MarketWatch in April 2002. In addition to his regular columns for MarketWatch, Hulbert writes a column on investment strategies for the Sunday New York Times, a monthly column for Barron's.com and a column on newsletters for the Journal of the American Association of Individual Investors. Dow Jones and MarketWatch are launching a weekly newsletter, Hulbert on Markets: What's Working This Week.
Way back in the early part of this century, Viacom chief and all-father Sumner Redstone was fond of telling analysts and reporters his media-industry mantra: Content is king.
11:48 a.m. April 29, 2010 | Comments: 1
- nmecmbtnt | 11:11 p.m. April 29, 2010
"Mark Hulbert: Sentiment nears dangerous levels http://on.mktw.net/bzJDfV" 11:49 p.m. EDT, April 29, 2010 from MktwHulbert
"Mark Hulbert: What Greece means for the stock market http://on.mktw.net/ausRx6" 12:16 a.m. EDT, April 28, 2010 from MktwHulbert
"Mark Hulbert: Wall Street cheer absent on Main Street http://on.mktw.net/cj8zfw" 11:48 p.m. EDT, April 26, 2010 from MktwHulbert
"Mark Hulbert: Forecaster who called euro troubles weighs dollar http://on.mktw.net/cmxZ76" 11:36 p.m. EDT, April 22, 2010 from MktwHulbert
"Mark Hulbert: A rare buy signal with a good record http://on.mktw.net/ahj6nN" 11:28 p.m. EDT, April 20, 2010 from MktwHulbert
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