Overnight markets were higher, as were the Spooz, for no particular reason that I could see, other than the absence of any fresh bad news. The market opened about 0.5% higher, plus or minus, then proceeded to back off and by midday was back to flattish. From there the indices bounced and with an hour to go (when I left) the indices were modestly higher, led by the Nasdaq.
Away from stocks, the dollar was weaker, although stronger than the yen, as those two currencies both continue to be in the doghouse. Fixed income was slightly weaker. Oil was unch’d. The metals were roughly 0.3% higher.
Bears Approaching Endangered Species Territory
In a somewhat startling development, Investors Intelligence reported one of the biggest one-week changes in history, as the percentage of bears dropped about 30% to 15.7, the second-lowest reading of the last twenty years (thanks to Jason Goepfert for calling that to our attention). Similarly, though not as lopsidedly, the percentage of bulls climbed to 57.3.
It may seem sort of odd that the percentage of bears has collapsed to such a low level when QE2 is about to end and the world is teeming with problems. Perhaps it is a consequence of the fact that most people do not understand that the market is where it is because of money printing, therefore the fact that it is ending does not concern them.
Most people had no clue at the time that we had an equity bubble, which was a consequence of rather modest money printing compared to today’s version. Nor did they recognize the real estate bubble, which was also a result of money printing, as well as absurd credit standards.
All In It Together
Now we have easy money on a truly epic scale, but again folks appear not to see it as the reason stocks are where they are and why the economy has done as well as it has. Thus, the fact that the bus is headed for the cliff, from that standpoint, appears not to faze people.
The sentiment statistics may get even more lopsided in the near term, but it certainly seems to me that, while stocks may not be ready to decline with any sort of vigor, the risk/reward in equities generically is not appealing. At the same time, there is literally no enthusiasm for the assets — i.e., precious metals and related ideas — that protect us against free money policies, even after all that they have done. It seems like a rather odd dichotomy, but I think it can be explained, as noted above, by the sheer lack of understanding about what distorted monetary policies do to financial markets and the economy.