Sunday, March 12, 2006

Investor Sentiment and March Madness

  • There is a big debate going on between those who think everyone is bullish vs everyone who thinks everyone is bearish. Just who is right? An interest column is up at Decisionpoint that graphs the market vs. the Investors Intelligence survey.  (See link for chart).  Excerpt:

"...a divergence has developed in the Investors Intelligence Advisor Sentiment poll that I have to interpret as bullish. Note on the chart below how the percentage of bulls has dropped, the percentage of bears has increased, and the Bull/Bear Ratio is at its lowest point since the August 2004 low, which marked the end of the longest and deepest correction of the current bull market. "

  • I've been saying the same thing that they mention at Decision point.  Normally, as the market rises sentiment becomes more bullish.  But this time, we've seen the number of bears increase.  Amazing. I think the market is going up. Near the end of the week, I became more aggressive in my holdings and moved some cash into higher beta holdings. When the market is weak ahead of options week, normally options week is positive. We didn't see that strength kick in near the end of last week as aI thought, but the market really isn't that far from the highs. I see the head and shoulders pattern in the QQQQ, but that's not a very reliable pattern (IMHO). I don't invest by stock charts, either. Although I will concede that stock charts are a great way to predict the past!

  • The season 3 finale of Battlestar Galactica was a good one.  90 minutes found President Rosalyn trying to steal the election, and ultimately giving the reigns to Baltar.  Baltar then decides to habitate a planet they found that they think is hidden from the Cylons.  Most folks leave and populate the planet.  Then... the Cylons come and Baltar surrenders.  But the Galactica and Pegusus jump away from the planet when they detect the Cylon base ships.  There is your cliffhanger.  You have to wait until October for the start of season 4!
  • Speaking of the Sci Fi channel, they're coming out with a new Dr. Who series starting next friday.
  • I have some NCAA hoops on.  For some reason, having some problems getting into the conference tournies.  The dance starts this coming week!
  • How does March Madness affect the stock market?

You might wonder what your team's losing has to do with investing. But it actually has a lot to do with it. A recent academic study found that investors act irrationally in their despair following losses by their favorite teams.

  • Looks like Arnold Schwarzenegger's mega-bond hopes are toast for the June election. Probably would've passed. People love to borrow money.  Now of course we still have the very lame Free Preschool For All measure on the June ballot. It basically subsidizes pre-school for the folks who are paying it out of their pockets today. (Mostly middle class and rich folks). 62% of kids already go to preschool, and this legislation hopes to increase that to 70% but then shift all the costs to the taxpayers. The rich tax bracket will go up 2% to 11%. Wow, more folks moving out of state on this one I think...
  • Added Stockdigg to the list of links to the right. It's an interesting site to see what folks are reading and recommending. It contains financial news and user-submitted stories (e.g. stock picks and analysis) and individual stock rankings by investors. Folks recommend links by "tagging" them. Check it out...

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