Joseph Hogue on the magazine cover curse

A much less technical sign is in the overall bullishness of investors and what’s been called the Cover Curse.  Just last week, both Barron’s and The Economist published covers trumpeting the new bull market but not all are cheering.  These displays of optimism from the media have more often than not previewed a change in the market. 

Like when Time covered the ‘Secrets of the New Silicon Valley’ and ‘GetRich.com’ September 1999…just four months before the dot-com bubble peak.  Or when BusinessWeek called for ‘The Death of Equities’ in August 1979, just before the 80s boom that doubled stock prices.  In fact, in a study of 50 magazine covers back 25 years, researchers have found that this level of media optimism or negativity is a contrarian indicator with a 68% success rate.  That means, if you were to bet against the cover’s thesis, you could have called a market change 7-out-of-10 times.

~ Joseph Hogue, Bow Tie Index, March 21, 2024

The Economist: "You have to marvel at America’s economy"

You have to marvel at America’s economy.  Not long ago it was widely thought to be on the brink of recession.  Instead it ended 2023 nearly 3% larger than 12 months earlier, having enjoyed one of the boomier years of the century so far.  And it continues to defy expectations.  At the start of this year, economists had been forecasting annualised growth in the first quarter of 1%; that prediction has since doubled.  The labour market is in rude health, too.  The unemployment rate has been below 4% for 25 consecutive months, the longest such spell in over 50 years.  No wonder Uncle Sam is putting the rest of the world to shame.  Since the end of 2019 the economy has grown by nearly 8% in real terms, more than twice as fast as the euro zone’s and ten times as quickly as Japan’s.  Britain’s has barely grown at all.

~ "America’s extraordinary economy keeps defying the pessimists: Both Donald Trump and Joe Biden have ideas that endanger it," The Economist, March 14, 2024

Barron's makes the case for optimism about stocks (2021)

[T]his is a market determined to march higher, and it’s not about to be derailed - even by historic mayhem in the nation’s capital.  Stocks are rallying on the trillions of dollars in stimulus that may only be accelerated under the new administration.  A chaotic political season is winding down, while the economy is gearing up for a postpandemic reopening. 

Investors need to keep their eyes forward and look ahead to a Joe Biden presidency: to more-predictable domestic policies, smoother trade relations, and additional efforts to revive the economy.  Now might not be a good time to own anything defensive.

~ Daren Fonda, "Risks and Opportunities As Democrats Win Control," Barron's, January 11, 2021

Michael Metz: negative sentiment is bullish (1990)

The market has held up remarkably well in the face of a barrage of bad news.  We've had the collapse of the savings and loans, the Campeau bankruptcy, the fall of Drexel Burnham Lambert Inc., the big write-downs of the New England banks, fear of poor earnings and the disaster in the Japanese market.  And yet the American market doesn't go down.  I think the market is telling us everyone has already assumed the worst and (that) the majority who want to sell stocks have done it.  It's an overconfident market that is vulnerable.  This is not an overconfident market.

I expect the Dow to make a new high soon.  And later this year I look for the Federal Reserve to easy monetary policy and a stampede of buying to set in , driving the Dow well over 3000 on expanding volume.

~ Michael Metz, "With Sentiment So Bearish, Stocks May Rise," Investor's Daily, April 9, 1990

(At the time, Investor's Intelligence survey showed 45% of investment advisors bearish and 43% bullish.  Equity mutual fund cash levels were at 11.5%.)

Peter Atwater: headlines "on the front page always confirm the bias of the reader"

When somebody picks up The Wall Street Journal, the Financial Times, whatever they do - and you can do it online - is to step back and say, as you're reading these headlines, "why are they here?"  "Why are these on the front page?"  And they're on the front page always to confirm the bias of the reader.  It is very, very rare that you'll see on the cover of The Journal, the Financial Times, the New York Times, something that is challenging, that's going to cause the crowd to step back.   What they want is for you to start reading and keep reading from there.  So the front page is telling you, "this is the consensus view."

So often you will have seen a story that a week ago was on page B-18 move to the front page of the B section, to move finally to the front page of the front section.  So that migration is telling you that the  story has legs, that it sticks and that the momentum is now peaking.  I think it's important to recognize that front page acreage is incredibly expensive.  So nothing can last there.  It hits and goes.  So this is the editors capitalizing on the frenzy, and once it's there it's done.

~ Peter Atwater, "Indicators Hiding in Plain Sight," interview with Grant Williams on Real Vision, 17:30 mark

David Tepper: "You're nowhere near an overheated market" (2017)

Any comparisons to past overheated markets are ridiculous. Look at where multiples and rates were in 1999. I'm not saying stocks are screaming cheap, but you're nowhere near an overheated market.

~ David Tepper, telephone interview with Scott Wapner, CNBC's Fast Money, August 15, 2017

Aaron Task on the absence of irrational exuberance (2014)

I don't see much of any signs of irrational exuberance.  We've got the Shiller piece.  We're here talking about things people are worried about.  Who is out there banging the table saying, "you've gotta own stocks, they're fantastic, they're great, buy 'em here?"  Everyone thinks the wheels are about to come off the bus.  So until we get to a place where everyone says you can't lose in the stock market, then call me and talk about irrational exuberance.

~ Aaron Task, Yahoo Finance interview, August 18, 2014

MarketWatch columnist: "The main causes of a genuine bear market are not on the horizon"

Now other sectors fueled by speculative fever and cheap money — biotech, post-IPO social network companies and high-momentum stocks — are getting their comeuppance. But the broader stock market has a long way to go before it’s even in a decent correction.
                                       
Plenty of things can cause that, including weak first-quarter earnings, poor economic reports, and the fact that we’re entering two of the worst quarters for stocks in the four-year presidential election cycle.
                                        
But the main causes of a genuine bear market — impending recession or deflation, ultra-high stock price-to-earnings ratios or rapidly rising interest rates — are not on the horizon.
                                       
So unless you’ve borrowed to the hilt to buy Twitter or the biotech ETF, you should stay invested and not lose a minute’s sleep. As far as market shocks go, this looks like a mild tremor, not the big earthquake everybody fears.

~ Howard R. Gold, "Don’t let these stock market gyrations scare you; Opinion: It’s likely that we’ve seen the end of recent declines," MarketWatch.com, April 13, 2014

Barron's editors: housing bubble blowoff still to come

There seems to be a bubble in news coverage about the housing bubble, which shows editors aren't much different from investors in trying to latch onto a hot trend.  But which stories should contrarians bet against - ones warning of the bubble bursting or those explaining why house prices are unlikely to crash?  In the late 1990s, when tomes forecasting Dow 10,000 came out, bears were slaughtered before they were vindicated.  Indeed, the final blowoff is the most violent phase.  We could be at a point in housing analogous to 3000 on the Nasdaq - which hit 5000 before crashing to 1200.

~ Barron's "Market Week," May 30, 2005

Maria Bartiromo: 2-day correction is healthy and a buying opportunity

Finally my observation on this market sell-off today. This may sound strange. As an optimist I was happy the market stayed down and did not rally from the lows into the close. Why do I say that? Well, this market has been trading up in a straight line pretty much since November of 2012. In fact today and yesterday was the worst two-day drop since November. And still the S&P 500 and the Dow are up in the double digits year-to-date. This may be the moment market pros have been waiting for, an opportunity to actually get in at better levels, lower levels. So my point is seeing a pull-back is exactly what you would want from a healthy market.

The question of course has to be has anything really changed? And in some cases it has. Interest rates have begun to move up. The conversation on Wall Street has begun to shift, to not if, but when the Federal Reserve will slow down the stimulus by cutting the amounts of bonds it buys. And even amid the rally there remain a healthy level of skepticism - some 30% of accounts are sitting in cash. (You just heard that from [UBS Group CEO] Sergio Ermotti.)  At some point that money will come back into the market and go to work. And that point could be here in this pull-back. Because any clear-thinking investor knows, nothing goes up in a straight line.

Many traders I spoke with today told me they are hoping for further selling tomorrow because they want to see a clean sweep.  They want to truly believe that there is value to be had by getting in for the long-term at lower prices. And if we are down tomorrow, it would be the first three-day losing streak for the Dow this year. First three-day losing streak this year.  That's incredible, and not normal. There may be more selling to come.  In fact, it would probably be healthy if there was. But long-term, most people do believe it will once again be a buying opportunity.

~ Maria Bartiromo, "Maria's Observation," CNBC, June 5, 2013

Wilmington Trust analyst bullish: "momentum is really strong"

There isn't a technical level that we have in mind at this point when making decisions. The momentum is really strong, and riding along that momentum is what we should have in mind at this point.

~ Cam Albright, director of asset allocation at Wilmington Trust Investment Advisors, "Correction talk gets old as market sails ahead," Fox Business News, May 18, 2013

The Washington Post on quantitative easing

We can argue all day long about whether quantitative easing policies from the world's central banks are doing much to help the economy. But this much is for darn sure: It is boosting a wide range of financial markets ... So, why are some of the people who you would think would be the biggest beneficiaries of this strategy so angry about it? That was the consistent tone among titans of the hedge fund industry at the Sohn Investment Conference conference [sic] Wednesday ... Zero interest rates from the Fed haven't sparked inflation; interest rates have fallen despite huge government deficits; and the stock market has risen steadily in the face of a still-weak economy ... it may just be more convenient to blame the (bearded) man behind the curtain as the master market manipulator than to own up to your mistakes.

~ The Washington Post, May 9, 2013