{"id":29460,"date":"2012-05-03T07:17:06","date_gmt":"2012-05-03T11:17:06","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/2012\/05\/what-says-the-big-money\/"},"modified":"2012-05-03T07:17:06","modified_gmt":"2012-05-03T11:17:06","slug":"what-says-the-big-money","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/05\/03\/what-says-the-big-money\/","title":{"rendered":"What Says the Big Money?"},"content":{"rendered":"

By The Sizemore Letter<\/a><\/p>\n

\"\"<\/a>It\u2019s that time of year again, dear reader.\u00a0 Twice per year, Barron\u2019s<\/em> does a survey of large professional money managers to get their outlook for the market (see \u201cReason to Cheer<\/a>\u201d).<\/p>\n

I get a lot of value out of reading the survey results, but not necessarily for the reasons you might think.\u00a0 This is a topic I first covered for Market Watch late in 2011 (see \u201cBig Money Looks Bullish<\/a>\u201d).<\/p>\n

It generally pays to invest with the Big Money.\u00a0 After all, these are some of the best and brightest minds in the business, and they have the ability to move the market.\u00a0 But even professionals can succumb to herding behavior at times.\u00a0 When it appears that \u201ceveryone\u201d is on the same side of a trade, surveys like these can be useful for crafting contrarian bets.\u00a0 Ideally, you like to see a general consensus among the Big Money but not quite unanimity.<\/p>\n

So what says the Big Money today?<\/p>\n

They are more bullish than they were six months ago, which makes sense when you consider that the survey was done before April\u2019s volatility put a damper on the first-quarter rally.\u00a0 55% of those surveyed were \u201cbullish\u201d or \u201cvery bullish\u201d about the market\u2019s prospects through June 2013.\u00a0 31% were \u201cneutral,\u201d and only 14% were \u201cbearish\u201d or \u201cvery bearish.\u201d<\/p>\n

This is the sort of bullish consensus I like to see; the Big Money is optimistic without being euphoric.\u00a0 <\/strong><\/p>\n

Sentiment towards other asset classes tells a very different story, however.\u00a0 81% of the investors surveyed were bearish on U.S. Treasuries.\u00a0 17% were neutral, and only 2% were bullish.<\/p>\n

Normally, skewed sentiment like that would get my pulse racing, and I would be tempted to take the other side of that bet.\u00a0 2% bullishness would suggest that there is \u201cno one left to sell,\u201d in trader parlance.\u00a0 Unfortunately, with Treasury yields what they are, there is simply not enough upside potential to make the trade worthwhile.\u00a0 Even if the 10-year note were to fall in yield from its current 1.96% to something along the lines of 1.50%, this would not be a particularly profitable trade unless you used reckless amount of leverage.\u00a0 Some trades are best left alone.<\/p>\n

Bullishness is surprisingly high for Latin American stocks, at 53%.\u00a0 39% are neutral on the region, and only 8% are outright bearish.<\/p>\n

Interestingly, the Big Money is not particularly bearish on Europe, despite Spain\u2019s recent travails.\u00a0 56% were neutral on the region, and 27% and 17% were bullish and bearish, respectively.\u00a0 It would appear that the Big Money agree with Sizemore Capital\u2019s view that the attractive valuations on offer in Europe more or less compensate investors for the short-term risks they face in investing there (Sizemore Capital has a large allocation to Europe in its Tactical ETF Portfolio<\/a>).<\/p>\n

Returning to the U.S. market, the Big Money appears to be a bit torn with respect to Apple (Nasdaq:$<\/span>AAPL<\/a>).<\/strong>\u00a0 Apple made the \u201cfavorite\u201d list, but was also ranked as one of the eight most overvalued stocks.\u00a0 Go figure.<\/p>\n

At the sector level, I see some evidence of mild herding (see chart<\/a>).\u00a0 Technology, presumably led by Apple, was picked as the best performer for the next 6-12 months by 31% of respondents and as the worst by none.\u00a0 Meanwhile, utilities were picked as the worst performer by 30% and as the best by only 3%.<\/p>\n

\"\"<\/a><\/p>\n

During last year\u2019s volatile second and third quarters, the utilities sector performed extraordinarily well relative to the rest of the market.\u00a0 Given the low expectations for the sector, could another solid run be a possibility?<\/p>\n

Given investor hunger for yield these days, utilities could easily enjoy a nice run in an otherwise choppy market.\u00a0 Investors wishing to test this theory can buy shares of the Utilities Select SPDR (NYSE:$<\/span>XLU<\/a>).<\/strong>\u00a0 It yields a handsome 4% in dividends and should provide some measure of protection should the market experience another wave of volatility.<\/p>\n

Disclosures: Sizemore Capital has no position in any securities mentioned.\u00a0 <\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

By The Sizemore Letter It\u2019s that time of year again, dear reader.\u00a0 Twice per year, Barron\u2019s does a survey of large professional money managers to get their outlook for the market (see \u201cReason to Cheer\u201d). I get a lot of value out of reading the survey results, but not necessarily for the reasons you might … <\/p>\n

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