Mr. Market Doesn't Care What You Think!

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Mr. Market Doesn't Care What You Think!

Postby Rick Ferri » Tue Jan 22, 2013 10:26 am

We all have our opinion, but a new study of AAII sediment shows that Mr. Market Doesn't Care What You Think!

Rick Ferri
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Re: Mr. Market Doesn't Care What You Think!

Postby baw703916 » Tue Jan 22, 2013 11:10 am

Should I care what Mr. Market thinks?
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Re: Mr. Market Doesn't Care What You Think!

Postby Don Christy » Tue Jan 22, 2013 11:14 am

Rick Ferri wrote:We all have our opinion, but a new study of AAII sediment shows that Mr. Market Doesn't Care What You Think!

Rick Ferri


"AAII sediment" :D Those individual investors that sink to the bottom??

Nice blog, but no surprise that a basically random market (with slight positive real expectations) would be largely uncorrelated with almost anything, much less to sentiment.

Thanks - Don
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Re: Mr. Market Doesn't Care What You Think!

Postby LondonJimmy » Tue Jan 22, 2013 11:20 am

Of course Mr Market does not care about what you think or feel. Humans being humans generally get emotionally involved and thus create mistakes.

I was fortunate enough to be brought up from a very early age to understand this about the market. The market is merely quoting you prices. If you are shrewd and emotionally stable, you will feel good about when the market goes down. I genuinely feel good when I see prices fall and I feel more cautious as prices rise. This is the complete opposite from 99.9% of people and for this sole reason, this is why the vast vast vast majority of people would do better off investing in an index fund. However, if you can understand this and stay stable and not lose your head when people are panicking or being greedy, you will get rich.
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Re: Mr. Market Doesn't Care What You Think!

Postby tadamsmar » Tue Jan 22, 2013 11:34 am

LondonJimmy wrote:Of course Mr Market does not care about what you think or feel. Humans being humans generally get emotionally involved and thus create mistakes.

I was fortunate enough to be brought up from a very early age to understand this about the market. The market is merely quoting you prices. If you are shrewd and emotionally stable, you will feel good about when the market goes down. I genuinely feel good when I see prices fall and I feel more cautious as prices rise. This is the complete opposite from 99.9% of people and for this sole reason, this is why the vast vast vast majority of people would do better off investing in an index fund. However, if you can understand this and stay stable and not lose your head when people are panicking or being greedy, you will get rich.


Depressed markets are good if you are young and have lots of accumulation ahead of you. Not so good for a retiree with a nest egg that's not large relative to projected consumption.
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Re: Mr. Market Doesn't Care What You Think!

Postby LondonJimmy » Tue Jan 22, 2013 11:42 am

tadamsmar wrote:Depressed markets are good if you are young and have lots of accumulation ahead of you. Not so good for a retiree with a nest egg that's not large relative to projected consumption.



Yes, deff.
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Re: Mr. Market Doesn't Care What You Think!

Postby Chan_va » Tue Jan 22, 2013 11:52 am

From the article - "except when extreme bearish or bullish sentiment exists and then it’s negatively correlated"

Would be interesting to see if this held true for the bond market as well - Right now, there seems to be an extreme bearish sentiment in the bond market. Maybe time to load up?
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Re: Mr. Market Doesn't Care What You Think!

Postby steve r » Tue Jan 22, 2013 12:05 pm

Mr. Market doesnt care what I think ... nor do my teenage children.
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Re: Mr. Market Doesn't Care What You Think!

Postby abuss368 » Tue Jan 22, 2013 12:27 pm

Rick Ferri wrote:We all have our opinion, but a new study of AAII sediment shows that Mr. Market Doesn't Care What You Think!

Rick Ferri


Hi Rick,

This was a very good post that I really enjoyed reading.

Thank you for providing your expertise to this site.

Best.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + REITs
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Re: Mr. Market Doesn't Care What You Think!

Postby Firewood42 » Tue Jan 22, 2013 1:26 pm

LondonJimmy wrote:
tadamsmar wrote:Depressed markets are good if you are young and have lots of accumulation ahead of you. Not so good for a retiree with a nest egg that's not large relative to projected consumption.



Yes, deff.

Exactly, 5 percent cd's would have taken all the worry out of my retirement but now I am faced with Mr. Market again. And he doesn't care.
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Re: Mr. Market Doesn't Care What You Think!

Postby Rick Ferri » Tue Jan 22, 2013 6:19 pm

Net extreme is >16 percent bearish and >32 percent bullish. AAII's latest survey conducted on 1/16/2013 was 43.9 percent bullish and 23.7 percent bearish resulting in net sediment indicator of 20.2 percent. It might be higher this week, but I doubt extreme.

Rick Ferri
Last edited by Rick Ferri on Fri Jan 25, 2013 3:00 pm, edited 2 times in total.
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Re: Mr. Market Doesn't Care What You Think!

Postby umfundi » Tue Jan 22, 2013 7:05 pm

Rick Ferri wrote:Net extreme is >16 percent bearish and >32 percent bullish. AAII's latest survey conducted on 1/16/2013 was 43.9 percent bullish and 23.7 percent bearish resulting in net sediment indicator of 20.2 percent. It might be higher this week, but I doubt extreme.

Rick Ferri

What we need is a survey on what people think of the AAII survey.

Then we could do a survey on what people think about the survey about the AAII survey.

Keith :P
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Re: Mr. Market Doesn't Care What You Think!

Postby Rick Ferri » Fri Jan 25, 2013 3:00 pm

Net extreme is >16% bearish and >32% bullish.


AII's latest weekly survey conducted on 1/23/2013 was 52.3% bullish, up 8.4%, and 24.3% bearish, down 3.2%. The net sediment indicator is 28% bullish. That's getting close to extremely bullish, but not yet.

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Re: Mr. Market Doesn't Care What You Think!

Postby midareff » Fri Jan 25, 2013 3:05 pm

a contrarian indicator.... :twisted:
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Re: Mr. Market Doesn't Care What You Think!

Postby Random Musings » Fri Jan 25, 2013 3:25 pm

Rick Ferri wrote:
Net extreme is >16% bearish and >32% bullish.


AII's latest weekly survey conducted on 1/23/2013 was 52.3% bullish, up 8.4%, and 24.3% bearish, down 3.2%. The net sediment indicator is 28% bullish. That's getting close to extremely bullish, but not yet.

Rick Ferri


A good technical analyst doesn't hang his hat on one indicator. :wink:

RM
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Re: Mr. Market Doesn't Care What You Think!

Postby Ranger » Fri Jan 25, 2013 3:30 pm

Image


Based in the above chart, AAII sentiment indicator looks like mostly co-incident indicator to me. This chart does not include this weeks updated number
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Re: Mr. Market Doesn't Care What You Think!

Postby Anon1234 » Sat Jan 26, 2013 12:05 pm

midareff wrote:a contrarian indicator.... :twisted:


Do they have a chart showing previous 1wk and 6mos return versus net sentiment? I suspect (aggregate) investor sentiment would be a better lagging indicator. Edit: Nevermind, that's the correlation chart. They did 1, 2 and 4 weeks, but didn't show 26.
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