Practical analysis for investment professionals
04 September 2014

Weekend Reads for Global Investors: The Missing Bears

Posted In: Weekend Reads

Regular readers of the Weekend Reads series might recall that in my last post for the series I touched on how economic recovery had been weaker than expected in many parts of the world. Apparently there is something else that is also missing from the market scene: bears. According to a CNBC report, a weekly Investors Intelligence report has indicated that bearishness among market newsletter writers has fallen to 13.3%, the lowest level recorded since 1987. Now that is a powerful combination!

Investor enthusiasm globally is rather obvious. As I was leaving Hong Kong earlier this week for a business trip to London, the Hang Seng Index continued to make new (six-year) highs. The weather in London may be cooler and foggier compared to Hong Kong, but the stock market here is just as hot, if not more. (When economists argue that the market goes up more on sunnier days, they are apparently not thinking about a cross section of global markets.) The FTSE 100 just hit its 14-year high as we speak. Winner of this global competition, however, goes to the bellwether US market. The S&P 500 Index has been hitting all-time highs left and right for some time now.

Morgan Stanley did not miss a beat and promptly issued their headline-grabbing prediction that S&P 500 will reach 3000 . . . in 2020. If you find yourself missing the late Morgan Stanley strategist Barton Biggs, who famously said in the height of the Internet bubble that “the fools are dancing and the bigger fools are watching. . . . I am one of the bigger fools,” you are in good company. Warren Buffet, for that matter, quoted Biggs in his letter to the shareholders this year: “A bull market is like sex. It feels best just before it ends.”

The gap between global economic growth and market performance did not escape the eyes of Mohamed El-Erian. Without exactly tipping his hand, he aptly observed that markets have been “extremely resilient” this summer. Warren Buffet, as my colleague Lauren Foster highlighted last week, has been quietly building a record cash pile. Sam Zell has been the most vocal, saying on CNBC that a stock market correction is coming.

Bill Gross, El-Erian’s former partner at PIMCO, pointed to the reason behind the lackluster economic growth picture in his latest monthly Investment Outlook: “Economic growth depends on the productive use of credit growth, something that is not occurring.” Lack of credit growth has been a universal phenomenon after the bubble bursts. At the recent CFA Institute Japan Investment Conference, Nomura economist Richard Koo compared what we are seeing in the US, Europe, and Japan today to Japan after the burst of the investment bubble in the 1980s.

Keynes would have probably just called it a lack of “animal spirits.”

The Missing Bears

Sunshine and Stock Market Returns (For Wonks Only)



Markets go up and down. Portfolio managers come and go. For people saving for retirement, however, it’s important to keep your eyes on the ball. What is your investment goal? Typically saving enough to cover your expenses in retirement after inflation is always a big part of it. This provides a different angle in evaluating performance. Unfortunately, things do not get easier there either.

Hierarchy of Needs

Public Speaking

And Now for Some Truly Weekend Reading

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Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

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About the Author(s)
Larry Cao, CFA

Larry Cao, CFA, senior director of industry research, CFA Institute, conducts original research with a focus on the investment industry trends and investment expertise. His current research interests include multi-asset strategies and FinTech (including AI, big data, and blockchain). He has led the development of such popular publications as FinTech 2017: China, Asia and Beyond, FinTech 2018: The Asia Pacific Edition, Multi-Asset Strategies: The Future of Investment Management and AI Pioneers in Investment management. He is also a frequent speaker at industry conferences on these topics. During his time in Boston pursuing graduate studies at Harvard and as a visiting scholar at MIT, he also co-authored a research paper with Nobel laureate Franco Modigliani that was published in the Journal of Economic Literature by American Economic Association. Larry has more than 20 years of experience in the investment industry. Prior to joining CFA Institute, Larry worked at HSBC as senior manager for the Asia Pacific region. He started his career at the People’s Bank of China as a USD fixed-income portfolio manager. He also worked for US asset managers Munder Capital Management, managing US and international equity portfolios, and Morningstar/Ibbotson Associates, managing multi-asset investment programs for a global financial institution clientele. Larry has been interviewed by a wide range of business media, such as Bloomberg, CNN, the Financial Times, South China Morning Post and the Wall Street Journal.

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