It took bull market sentiment three years to get here, and only three weeks to go back into hiding.

March 2009 showed a reading of 19.7 – that was 17,000 Dow Jones points ago.

We’re now seven ticks away from that reading:

Bulls Chart1

Notice the pink line.

See how few readings there are below it over the past nine years.

And 2009 was equated to (yet another) end of the world, according to the experts.

It would be a mistake to underestimate how good this is for long-term investors. Individuals soured quickly on equities after they struggled in late January/early February.

And though sentiment remained surprisingly resilient at just under 50% into mid-February, the oft-referenced phrase here, "give me a few weeks of solid red ink and I will show you a crowd as afraid as they were in 2009" once again came home to roost.

The above marks the lowest weekly reading since the end of August 2017, and the largest two-week decline since June 2013.


And this shellacking of bullish sentiment has been taking place as the failure of yet another Wall Street marketing enticement has unfolded: "Passive" investing. 

Passive, eh?

Passive my a##! 

Note the record outflows as the red ink stacked up. Looks pretty active to me:

Bulls Chart2

Now that’s a plummet!

The red dot designates a level of outflow (read: Stark, raving-mad panic) just two short weeks ago.

And by comparison (above) it kind of makes the "end of the world panic" in late 2008-2009 look like a walk in the park.

All This Unfolds While....

The US is getting rich and setting records, with debt levels back to those seen in the 1980s! 

So hold on, buckle up and strap yourself in.

This ride has just begun.

Bulls Chart3

The chart above (courtesy Scott Grannis, Calafia Beach Pundit) tracks latest data from the US Fed on household wealth at the end of 2017, where it reached almost $99 trillion; having risen $7.1 trillion over the past year (+7.8%).

As in recent years, gains have come mostly from financial assets (up $27.6 trillion since late 2007) plus real estate (up $2.8 trillion since the pre-Recession peak of 2006). 

The key here is this was offset by only a $1 trillion increase in debt, as total liabilities rose from a recession peak of $14.6 trillion in 2008 to $15.6 trillion at the end of 2017.

That’s back to the types of levels we lived just fine with in the 1980s when the Dow Jones was below 3,000.

Manufacturing is Moving

These last two charts show how strong Manufacturing is both in the US and across the globe, which hints that exports are solid and the synchronized "good time" across the globe is being hidden behind all the terrible news.

Bulls Chart4

Bulls Chart5

Export orders are arriving steadily suggesting overseas economies are also doing very well.

And I’ll point to what is a fairly decent correlation between the ISM manufacturing index and the health of the overall economy.

February's latest numbers strongly suggest that Q1 of 2018 growth could even exceed current forecasts of 3%-3.5% (according to the NY and Atlanta Fed's models, respectively).

So expect the chop and churn to easily last for another couple of weeks, and then the annual summer doldrums will be here before you know it.

That's all ok, as a little pain now suggests gain later. 

Remember that frustration today is paid for tomorrow, but only for those who can try to stop trading and start focusing on the long-range benefits ahead.

Mike Williams
Founder and Managing Partner

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