Fred Hickey: "Fear has left the building"

We all know the markets are driven by two sentiments: fear and greed.  Currently, investors show no fear but plenty of greed as they pile into stocks as if it were 1999 all over again.  The much-watched Investors Intelligence survey of investment newsletter writers last week reported that the percentage of bears was down to 14.4% - a level not seen in 26 years - 1987, before the crash.

The Consensus Bullish Sentiment Index is currently at 77% - putting it firmly in the "market is overbought" territory.  After four consecutive years of withdrawals (2009-2012) investors are now pouring money into stock mutual funds at the fastest pace in thirteen years (since the 2000 top).  Barron's estimates that equity mutual funds and ETFs are on pace to receive more than $450 billion in inflows this year, more than the previous four years combined.  Investors are chasing "story" stocks again.  Anything related to the "cloud," "Big-Data," social media and 3-D printing is fair game to drive into the stratosphere of infinite P/Es.  The Shiller cyclically adjusted price-to-earnings (P/E) ratio is now over 25, a level only exceeded three times before - prior to the 1929, 2000, and 2007 crashes.  According to Credit Suisse, U.S. nonfinancial stocks are 45% more expensive on a price-to-book basis than their global peers, an excess not seen since the 2000 crash period.

The Dow Jones Industrials and S&P 500 indices have risen for eight consecutive weeks, the S&P 500 has leapt 26.6% year to date and the Nasdaq Composite index has soared 34.5%.  There hasn't been a 10% correction since the fall of 2011.  Initial public offerings (IPOs) this year-to-date are more than at any time since 2000, with more than 60% of the IPOs funding money-losing companies.  Secondary stock offerings (over $160 billion) are at the heaviest pace ever (since Dealogic began keeping records in 1995).  Fear has left the building.

~ Fred Hickey, editor, The High-Tech Strategist, "Fear Will Make a Comeback," December 1, 2013

Greenspan spots bubble before the burst

It’s a bubble. It has to have intrinsic value. You have to really stretch your imagination to infer what the intrinsic value of Bitcoin is. I haven’t been able to do it. Maybe somebody else can.

I do not understand where the backing of Bitcoin is coming from. There is no fundamental issue of capabilities of repaying it in anything which is universally acceptable, which is either intrinsic value of the currency or the credit or trust of the individual who is issuing the money, whether it’s a government or an individual.

~ Greenspan says Bitcoin is a bubble with no intrinsic value, Bloomberg, December 4, 2013

Tepper stays bullish, predicts multiple expansion

I would be worried if I was a long/short guy and not long enough, that's what I'd be worried about. But I'm not worried, because I am long. But if I'm a long/short guy who can only go 60% long … the biggest risk for the market is you'll have multiple expansion, higher growth, 10% earnings growth next year, and you'll have another year of 20%-30%.

~ David Tepper, "David Tepper on why the bulls are right," Bloomberg, December 4, 2013

Alan Greenspan sees no bubble... again (2013)

There are a lot of things that can go wrong, but to say that the market is bubbly and in a position where it could conceivably create a serious problem, I think is overstating it.

~ Alan Greenspan, FOX Business News, "Greenspan to FBN: Stocks Aren't in a Bubble," November 26, 2013

Andrew Ross Sorkin on meltdown 2.0 (2013)

There's not going to be a sequel.

~ Andrew Ross Sorkin, CNBC Squawk Box, November 21, 2013 at 8:10 AM ET

Time's Justin Fox on Irving Fisher, "the country's first great economist"

[Irving] Fisher was the country's first great economist, a pioneer of the mathematical approach that came to dominate the discipline after his death. Fisher saw the behavior of the market in rational, mathematical terms. He wasn't completely doctrinaire about this--earlier in his career, he had allowed that investors sometimes behaved like sheep. But in the 1920s, convinced that skilled monetary management at the Federal Reserve and the rise of new, professionally run investment trusts had reduced the riskiness of markets, he lulled himself into believing that the prices prevailing on Wall Street were a reflection of economic reality and not of investor mania or a credit bubble.

~ Justin Fox, Time, "The Myth of the Rational Market," June 22, 2009

U.S. Treasury Secretary Jack Lew: "We're leading the developed world in the quality of our recovery" (2013)

The United States is recovering from worst recession since the Great Depression, and we’re leading the developed world in the quality of our recovery.

~ U.S. Treasury Secretary Jack Lew, November 12, 2013, "Treasury’s Jack Lew says the U.S. economy is thriving," MarketWatch.com, November 13, 2013