Individuals Not Bullish

This was an interesting tidbit published yesterday by Bespoke Investment Group.

"Following last Friday's announcement by the SEC that it was charging Goldman Sachs (GS) with fraud, many have made the argument that the events would drive the individual investor away from the market. With Goldman being accused of misleading its own clients, the case seemed to provide further evidence that the deck is stacked against the individual investor. If this week's survey from the American Association of Individual Investors (AAII) is any indication, then there is truth to the argument. In the last week, bullish sentiment showed its largest single weekly decline since November, dropping from 48.5% to 38.1%. Interestingly, the large drop in individual investor sentiment comes at the same time that newsletter writers, apparently unfazed by the SEC v. Goldman suit, turned even more bullish."

My thoughts:  Most of my clients are individual investors.  I would not describe them as either very bullish or very bearish right now.  While I have noticed some people willing to take on more risk, particularly I have been asked by a few people why we have any cash in accounts right now (note:  professionals always have some cash...).  I think the majority are just content right now to surf this wave higher.  I don't get the sense for example the majority of them would fight me if I said I want to raise a substantial amount of cash in their portfolios.  When that happens I'll think we are at a major market top. 

Individuals continue to pour money at a record pace into bond mutual funds and ETFs.  With bonds likely at generational lows this is likely to not end well.  We discussed this point here when we wrote about  Mutual Fund Money Flows back in February.

Link:  Individuals Not Bullish