Replies to post #160211 on Zeev's Turnips Patch-No Politics (ZEEV)

[dumaflotchie]

Wahz and All:

Thanks for the many posts that I have enjoyed of late. I happened to notice your poll and found it interesting from the perspective of so called "smart money".

This article from Fisher several months ago decribes a fascinating phenomenon of professional vs. average investor sentiment and the accordian-like effect that pulls all investors to one direction or another. Fisher described this as one of several reasons that 2003 (and perhaps 2004) would be up year:

http://www.forbes.com/forbes/2003/0303/106.html?_requestid=38

The third reason I don't expect a 35% fall has to do with a quirk of investor psychology. Recently I discovered investor psychology runs a continuous spectrum from higher-end, more famous and formally trained professional forecasters from the very biggest firms, down to lower-end, small money managers with little or no formal training (and nonprofessionals). Upper-end pros tend to be "mean reverters," meaning above-average years make them more bearish and below-average years make them more bullish. They want to revert toward average. Lower-end investors (professional or not), tend to be trend followers. They expect good years to be followed by good, and bad years by bad. From upper end to lower end is an accordionlike flexible psychological continuum. So, a long bull market pulls all investors together--toward more similar views. But long bear markets spread out sentiment, with high-end folks getting optimistic (by mean reverting) while low-end folks get ever more bearish.

The longer a bear market, the more that spreads out. And they all get more sure they're right. If the market is down 35% this year, high-end mean reverters will get more optimistic still, and low-end trend followers will get more pessimistic. Then, in 2004, with sentiment pancaked even further than it is now, the market will have to rise or fall a lot more than 35%, which seems much too much to be realistic, either way. But if the market is up big later this year, the mean reverters will get less optimistic, the trend followers less pessimistic and 2004 won't have to be unrealistically extreme. Hence psychology argues for up, not down. (For more, see "Blowing Bubbles," by me and Meir Statman of Santa Clara University, in the Journal of Psychology and Financial Markets, 2002, Vol. 3, No. 1).

Just curious if anyone here can tell me where one might find stock investment inflows/outflows of professional investors vs. average.

BTW, it would seem the polling is favoring an uptrend in this market.......hope this is the smart money ;).

[brainlessone]

there is a chart pointer that goes about there. I think we are in a big cup and handle formation, so I see a bit of flat to sell off in near future as handle develops on nas/comp. as per individual stocks, it all depends on how many indiv stocks are in a similar formation

[Softechie]

Make 5000 for Nasdaq in 2004!!! Da Bulls love to hear this...