Merrill Lynch: Money Managers Are Pessimistic
Kurt Brouwer October 15th, 2008
Merrill Lynch regularly surveys large money managers around the globe to see how they feel about various assets. Right now, the only appealing asset for big investment firms seems to be cash. And, they particularly do not like stocks. Nor do they like Wall Street analysts, although it’s hard to fault them for that.
Brett Arends, who writes the R.O.I. column for the Wall Street Journal, opines on the findings of the latest survey and what it might mean for investors [emphasis added]:
Is Pessimism Good News? (Wall Street Journal, October 15, 2008, Brett Arends)
…the mood is so utterly bearish across the board right now that I am fighting the urge to turn into a raging bull.
Look at Merrill Lynch’s latest fund manager survey. Every month, Merrill surveys the biggest money managers around the world to find out what they think about markets and what they are doing with their own portfolio.
Right now they hate almost everything except cash. Merrill calls the new survey, out Wednesday, “one of the most pessimistic” ever. “Over the past month, fund managers have lost faith in global growth, commodities, China’s economy and emerging markets,” the firm reports.
Sound bearish? That isn’t. Quite the reverse: When the big money managers are very bearish, that’s often positive. It means they are already out of the market. “Three factors are coming together that have tended to be associated with market rallies,” reports Merrill.
…The Merrill survey sometimes is an incredibly useful handbook for individual investors. It tells you what the big money crowd is thinking, and feeling, and where they have placed their chips. At market extremes, it is a wonderful contrarian indicator, or “magnetic south,” pointing in exactly the wrong direction.
Thus fund managers were hugely bullish on European equities 16 months ago, just before those markets collapsed, and hugely bearish on Japan back in the spring of 2003, just as it hit rock bottom.
A staggering 93% today are blowing Bronx cheers at analysts’ earnings forecasts. They think corporate earnings will disappoint in the year ahead. Indeed 51% believe forecasts are “far too high.”
…Everywhere you go, there huge skepticism about any rally. Worldwide share prices are worth 30% less than they were at the start of September, and nearly a fifth less than they were at the start of October, but unlike in 2001, or 2006, no one is calling this “a great buying opportunity.” No one is jumping in.
The Wall Street Journal on Tuesday reported that a number of big hedge fund managers have also been moving heavily into cash in recent days. Some of them are frightened about the market chaos. It makes you wonder why they’re hedge fund managers…
The market crash in the past month has been astonishing and it has caused many investors to wonder why they own stocks or mutual funds or even hedge funds. Neither I nor Brett Arends knows when this market for stocks — and for most bonds too — will turn around. But, the increase in skepticism and the downright pessimism we are seeing now is a phenomenon that generally appears at market bottoms.
- Hedge Funds , Investing , Mutual Funds , Personal Finance
- Comments(0)
Did you enjoy this article?
