Blogger Burnout and Complacent Investors

November 13, 2006 7 Comments

I want to first apologize for the lack of posts over the last month.  I’ve suffered a bad case of "blogger burnout."   I’ve got about 10 half-finished posts that I never got around to completing because of the  quarter-end work load and conference call crush of earnings season.  I really hit a wall when I spent three days writing up a long idea for Wrigley (WWY) and the stock exploded higher on the announcement of decent earnings and a new president before I could finish the article.  But with earnings season passing, I’ve gotten more time to think about stocks and the markets and hope to reignite my writing. 

With that, I just wanted post a somewhat disturbing piece of research from Morgan Stanley this morning.  Each year, Morgan holds a gathering of portfolio managers in posh Lyford Cay, Bahamas.  Morgan’s macro analysts do a great job of summarizing the goings-on at the conference which provides us lower-level financial types some idea of what the higher-ups are thinking.  Oftentimes, this consensus thinking provides some great counter-trend trades.  Even though these are some of the smartest people in the business, if everyone is thinking alike and positioned with the consensus, then there’s a good chance the information has already been priced into the market. 

The complacency expressed by managers at this year’s conference struck me as particularly disturbing.  While complacency isn’t necessarily a good timing indicator, it does indicate that any negative events aren’t being priced into the market and could cause a sudden downturn as everyone heads for the exits. 

I might just be biased because I remain cautious on the economic outlook.  Therefore, I’ll let you decide by reading the summary yourself.   The full article can be accessed here.  The summary comes from Morgan Stanley’s Stephen Roach:

We did a fair amount of interactive polling at this year’s conference in order to deepen our understanding of the macro assumptions held by the investors in attendance.  Three key conclusions: (1) Inflation was not perceived to be a major risk; fully 45% of the group thought the core CPI would recede from its latest reading of 2.9% in September 2006 into the 2.4% to 2.8% zone over the next 12 months.  (2) There was little concern over the interest rate outlook over the next year; the Fed was seen as more inclined to ease, and the inversion of the yield curve was thought to come to an end.  (3) US economic growth was thought likely to recede into the 2.5% to 2.75% range over the next year; fully 77% of those in attendance were looking for a modest updrift in US unemployment.

Market implications:  The Lyford consensus is banking on a quintessential soft landing.  With a persistence of low inflation unlikely to disrupt a still powerful liquidity cycle, this relatively benign macro scenario was generally viewed as a green light for these fully invested fund managers.

Risks:  We had ample discussions of the possibilities of a China slowdown, the bursting of the US housing bubble, a derailing of the credit cycle, and a politically-induced demise of globalization.  None of these risks seemed to faze the Lyford consensus in November 2006.   

7 thoughts on “Blogger Burnout and Complacent Investors”

  2. Real Time Update, America For Sale
    Well, we have our own “nonconcesus” opinions.
    We think the markets are ripe for change and we are
    taking advantage of these. See them below.

    Sorted the hell out of the QQQQ’s today and we are
    riding the Dollar Collapse and GOLD/OIL uptrend.
    If PPT wants to print the Dollars so be it we
    are ready. Too bad for fellow ordinary Americans who are suffering the worst management of the economy since the USSR.

    PLEASE GO TO http://borisc.blogspot.com to see all these comments
    KEEP EURO LONG/DOLLAR SHORT with 27% retracement rule
    KEEP 25% GOLD and XOI LONG.
    SELL ALL TRUSTS and 5% OF PIPELINES, left 95% ( cash+bonds ) 5% Pipelines.
    RIDE THE QQQQ TRAIN.

    Will be back with usual format Later this weekk.

    Edit View QQQQ 2/3 stop 44.55, Ride the train 1 comment by boris 7:59:00 AM Delete
    Edit View long term protfolio, sell trusts, sell 5% pipeline… 2 comments by boris 7:20:00 AM Delete
    Edit View take 1/3 qqqq profits now by boris 7:14:00 AM Delete
    Edit View Those short bkx, stops at 114 by boris 7:04:00 AM Delete
    Edit View place half stop at 44.50 half at 44.55 by boris 7:02:00 AM Delete
    Edit View cancell all stops by boris 7:00:00 AM Delete
    Edit View qqqq stop now at 44.50 by boris 6:55:00 AM Delete
    Edit View collect 1/2 profits at QQQQ at 44.27 by boris 6:54:00 AM Delete
    Edit View very important to break 44.41 by boris 6:53:00 AM Delete
    Edit View QQQQ stop at 44.55, breakeven by boris 6:52:00 AM Delete
    Edit View Sold qqqq at 44.55. stop at 44.65 by boris 6:49:00 AM Delete
    Edit View Jig Is Up, Folks by boris 5:07:00 AM Delete
    Edit View No Help, Going Down, by boris 5:06:00 AM Delete
    Edit View Who would believed this morning! 6 comments by boris 11/24/06 Delete
    Edit View AMERICA FOR SALE! 9 comments by boris 11/24/06 Delete
    Edit View Market Cornered Itself by boris 11/24/06 Delete
    Edit View Happy Turky Day America! 7 comments by boris 11/22/06 Delete
    Edit View Nobody Forget, Resistance Attracts by boris 11/22/06 Delete
    Edit View Please Note…. BUY-SELL-PRESSURE CHART 2 comments by boris 11/22/06 Delete
    Edit View better hold this 44.30 or 44.16 is next 9 comments by boris 11/22/06 Delete
    Edit View Support here at 44.47 and 44.40 2 comments by boris 11/22/06 Delete
    Edit View Rally unlikely by boris 11/22/06 Delete
    Edit View Still Volnurable by boris 11/22/06 Delete
    Edit View this trendline holding up every pullback by boris 11/21/06 Delete
    Edit View Ok Just about even today 4 comments by boris 11/21/06 Delete

    Boris Chikvashvili

  3. The Stock Market is wounded and dangerous.
    Look at the chart at http://borisc.blogspot.com
    It is from these kind of oversold levels
    that market has been able to rise, for last
    3 months. I do not see high probability for
    New highs this time, but shorts must be
    carefully monitored and Market needs to be
    given time/space to fail in the rally before
    declaring it dead.
    Keep Shorts with a 44.55 stop on 1/3 QQQQ.
    Keep Long GOLD/XOI/EURO and short $USDOLLAR
    with 27% retracement rule.

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