Are Contrarians the New Consensus?
THE RELIABLY WRONG CONSENSUS crowd is either fearful and frozen or blithe and inattentive. For investors looking to seize upon periodic extremes in market sentiment in order to bet the other way, the difference is crucial.
If Wall Street's recent run of anxious and inconclusive weeks indicates it's suffused with excess worry, then the smart money should be playing for a quick rally. If the polity of players is simply disengaged and unmoved, it could take at least another pullback before a good tactical buy point is reached.
Last week the indexes again trudged about, attempting nearly every day to make some forward progress, only to drift back by the close. This is the kind of pattern that can sap conviction from bulls and bears in near-equal measure.
The Dow Jones Industrials slipped 46 points to 9966. Each day the index spent time above the 10,000 mark, and each day it closed a bit below it, action that was even less exciting to watch than it is to read about.
The Standard & Poor's 500 slipped by all of two points to finish at 1093, while the Nasdaq Composite outperformed modestly, adding seven points to reach 1912.
Bond yields ticked marginally lower and oil prices softened slightly, which would seem to have cleared the way for stocks to make up some ground. But it wasn't to be. With no widely anticipated economic reports to focus the gaze of traders, stocks remained captive to the big structural and psychological issues that most are unsure how to game.
Stocks have been on a downward slant since early April and the indexes haven't made new highs since the first week of March. Swelling oil prices, ugly war headlines and a collective fixation on the prospect for the Federal Reserve kicking interest rates higher have placed the negatives front and center.
The abundant attention to known threats is one among several points being made by those who think the market is coiled to thrust higher.
The case for an upside respite also hinges on the one-sided selloff that culminated in a rapid intra-day rebound on May 12, when steep afternoon losses were erased in a hurry. The bulls, at least those who are bullish for a quick trade, are viewing that day's low as a significant one.
As the S&P 500 cascaded toward a 2004 low of 1076, certain measures of cumulative market breadth -- essentially, a running tally of winning stocks versus losers -- reached negative extremes not seen since the climactic lows reached in the fall of 2002.
The ratio of bearish put options traded to bullish calls has since held at high levels most days. Cash has flowed out of retail stock funds in recent weeks. Sentiment surveys showed a rise in bearish feelings. And the monthly Merrill Lynch global-fund-manager survey revealed a significant increase in caution among professionals, along with higher cash levels in their funds. All of these qualify as standard bullish signals for contrarians.
Several skilled investors who make a habit of zagging when the majority zigs have concluded that the current clever play is on the long side, for the above reasons and others.
Legg Mason fund manager Bill Miller, who's earned the market's regard during more than a decade of beating his benchmark, took to his firm's squawk box last week to tell the broker ranks that the market looks to have bottomed and the next significant move is likely to be higher.
Miller's call was unpublicized but made the circuit of market chatter, passed along respectfully by those who like to know what the smart guys are doing, and cattily by others, who note that Miller's funds are trailing the market this year.
There are other independent thinkers, skeptics until recently, who have also decided to play for a short-term rally. These include Jeffrey Saut, strategist at Raymond James, Doug Kass, manager of the hedge fund Seabreeze Partners, and Walter Deemer, the investment adviser who publishes Market Strategies and Insights.
In each case, these investors are expecting a rally in what they believe to be a long-term trading range with a bearish cast, one that frustrates the buy-and-hold crowd with its stingy and grudging gifts but rewards the shrewd (or lucky) opportunists.
But the way the market has traded since that supposedly auspicious low point of two Wednesdays ago nags at other market analysts. Rallies since then have been brief, abortive and supported by slack volume.
With so many voices declaring the market to be "oversold" and hanging firm at technical support levels, the fact that it hasn't yet bounced appreciably is in itself cause for some concern, says technical strategist John Roque of Natexis Bleichroeder.
Just how negative investor sentiment has become simply isn't clear. Short interest declined slightly in the month ending May 10. For all the talk of steep oversold levels, the broad market remains just 6% off its recent high, which may explain the lack of palpable fear out there.
And a survey of affluent investors by Smith Barney analysts, released last week, showed respondents' average long-term return expectation for stocks to be 20.8% a year, up from 15.7% last year -- hardly a sign of deep concern among the moneyed public.
The whole give-and-take surrounding the vigil for the Fed to begin lifting rates also holds interest for anyone looking to plumb the market's mindset.
Part of Bill Miller's point in his call was that the coming Fed tightening cycle won't be a repeat of 1994, when the first rate hike alarmed the stock and bond markets and led to broad declines. Indeed, the S&P has declined from its high almost as much as it did in response to the '94 rate move, a period that was followed by one of the best years ever in 1995.
This is Wall Street's latest stump speech -- that because the Fed shocked the market in February '94 and this time has well-telegraphed its intentions, the markets have fully discounted the effects well in advance.
But if everyone expects the rate hike and is now also saying that it will cause no harm, does that mean that investors have become too complacent about the impact? No one ever said that out-thinking the consensus was easy.
The differences between now and 1994 are vivid and plenty. Back then, measures of economic momentum like the ISM index wouldn't peak for 10 months after the first hike. There's some evidence those measures are now peaking.
And, of course, the stock market entered that earlier period in a strong bull market, at a new high, so '94 acted as a restorative consolidation. We're now in a post-bubble, liquidity-driven environment at a time when a cyclical bull market has yet to prove that it's something more.
Wahoo, WaMu!
On the quiet Friday just passed, nearly 2% of New York Stock Exchange volume was transacted in the shares of Washington Mutual, the big thrift now caught up in urgent takeover rumors. The stock jumped 9% Friday and 10.4% on the week, to finish at 43.20, amid scuttlebutt that the huge Anglo-Asian bank HSBC might buy WaMu. Both companies declined comment, but the market seemed to be keying on remarks by an HSBC executive in the press that the bank was interested in U.S. retail banking acquisitions, now that it has integrated last year's purchase of Household Financial.
WaMu management has struggled, largely without success, to convince Wall Street to value it as a powerful consumer brand and not just a thrift that's a slave to the mortgage market and interest-rate path. Even with last week's pop, the stock trades for 10 times this year's forecast earnings and carries a 4.3% yield.
Traders were speculating WaMu might choose to sell if it got a decent price, rather than wait out another interest-rate cycle that might nick its valuation further.
Given the furious nature of Friday's speculative surge, the only thing that seems clear is the stock could well trade down Monday if there's no announcement of a deal nor hint that one is brewing.
Leadership void
It's always possible the stock market could rally strongly without technology shares playing a leading role. And jumbo jets can stay airborne with one engine out. But neither is the preferred or most common means of getting where you want to go.
If there is to be another meaningful upward move in stocks soon, tech stocks will probably have to move again to the fore. A chart of the tech sector's strength relative to the broad market matches up tightly with the market's post-bubble renaissance.
For those looking for reasons for tech to sprint, the good news is that the sector has become less expensive relative to its projected earnings over the course of this year. The sobering counterpoint is that the sector is still trading at a premium valuation to the market that was rarely seen prior to the tech bubble of 1999-2000.
Technology earnings -- excluding, as most tech firms do, the effect of employee stock options -- have been impressive, surging 67% over year-earlier levels. The trend in profit forecasts for tech has also been positive, with estimates for the current year climbing about 6% from the start of the year.
With tech stocks declining a bit more than the overall market this year, those profit gains have slimmed the forward price-earnings multiple of the sector from the high 20s to about 23. That has brought technology stocks' P/E relative to the market down from a 64% premium to the current 42%.
Yet the 20-year median premium afforded tech stocks has been 30%, so tech remains expensive even by the standards of its own history. Based on price-to-sales relative to the broad market, tech is back at levels seen only from early 2000 through mid-2002, not a great time to bet on tech. Prior to that period the relative price/sales ratio last hit today's levels briefly in the mid-'Nineties.
Unattractive valuations alone wouldn't prevent tech stocks from rising, should risk appetites revive. The incipient mania over the Google IPO could always inflame another mutual infatuation between investors and Silicon Valley. And growing confidence among tech CEOs, trumpeted in conference calls and slick investor presentations, might lead Wall Street to begin mistaking cyclical business improvement for another secular Golden Age for tech companies.
But starting at an already-generous valuation, tech hardly seems capable of driving any enduring advance, unless analysts have badly underestimated the magnitude and duration of tech's current up cycle.
Supermarket sweep
The two places where the public has felt the sharpest pinch from building inflation pressures are the gas station and the supermarket, the very areas that economists exclude from the "core" inflation analysis.
Slick Footing: The Dow tried to retake 10,000 each day last week, failing every time and losing 46 points overall, closing at 9966. Hewlett-Packard bucked the trend with a 6% gain.
The sticker shock in gasoline prices has been furnishing producers of evening news shows with easy, consumer-pandering material for months now -- to the point where a backlash argument has arisen to argue, correctly, that gas prices aren't that high in real terms.
But the upward drift in food prices has proceeded without much public alarm. The price jumps in supply-constrained dairy-case items like milk and eggs have gotten some ink. But the broader rebound in food costs from depressed levels hasn't.
Yet the year-over-year change in retail prices at grocery stores has climbed from zero in early 2003 to nearly 4% in the latest consumer-price data.
By some investors' thinking, this little trend is one reason to consider befriending one or two of the widely disliked, strategically challenged supermarket stocks.
This group has been at the mercy of a merciless retailing gorilla, Wal-Mart, now the largest seller of food nationally and the one-word reason for investors to avoid the grocery stocks for years. That's been the proper call since at least the middle of 2001. More recently, the nasty and protracted California grocery-workers strike alienated customers and hit supermarket profits, to the benefit of Wal-Mart and Costco.
It isn't clear that traditional supermarkets can answer the discount threat of Wal-Mart and the high-end assault by the likes of Whole Foods Markets. But it's possible that a touch of pricing power could give some grocers a shot at surpassing depressed investor expectations.
Scott Kuensell, a portfolio manager at Brandywine Asset Management, thinks just a slight hind breeze of food inflation could make an important impact on supermarkets' famously meager profit margins.
It is by no means assured that food inflation can be successfully converted to profits by these chains. Pathmark Stores, the small and underachieving Northeastern operator, this month blamed surging beef, poultry, butter and cheese costs for a steep profit shortfall.
Yet Wal-Mart executives recently made some constructive comments about the potential aid of food inflation on results through this year. Some observers have taken this to mean Wal-Mart might relieve a bit of the price pressure that has smothered its competitors.
Brandywine owns Albertson's, the company run by General Electric alumnus Larry Johnston. The company stumbled badly just after he arrived, only to regain its footing recently.
Kuensell notes that in customer surveys, low prices are not even among the top three draws of a food store, trailing convenience and cleanliness among other factors. That suggests a skilled operator can still thrive with the right mix of products and presentation.
He also says, "Unless an industry is in secular decline, after a couple of years of taking it on the chin companies generally surprise to the upside and revert to the mean."
Albertson's is working hard to regain business in California, largely through selective discounting and a loyalty-card program. Johnston is also implementing the Six Sigma quality-control program that manufacturers such as GE have used to such great effect.
The stock has held up better than Kroger's or Safeway, even though at 16 times expected earnings for this year it is somewhat more expensive than its peers' multiples in the low teens. Albertson's also enjoys the support of a high dividend yield around 3.3%, perhaps limiting the downside from here.
Those P/E multiples hardly make the grocers' stocks seem dirt cheap, given the challenges the companies face. But Kuensell thinks that when profit levels are depressed, price-to-sales ratios indicate the embedded potential of higher profit margins. Albertson's trades at less than 0.25 times expected 2004 sales. As recently as 2001, its low point in price-to-sales was one.
If nothing else, this reflects a deep suspicion toward the company on Wall Street, something also evident in the dismissive attitude of brokerage analysts. There are three times as many Sell ratings as Buys on Albertson's, the kind of bearish consensus that can, sometimes, indicate a pendulum ready to swing the other way.
反向投资是否将成为主流？
如今市场的主流人气究竟是战战兢兢不敢轻举妄动，还是极为乐观且粗心大意？对于那些希望抓住阶段性市场极端情绪而进行反向操作的投资者而言，上述区别十分关键。
如果最近几周华尔街的焦虑不安和犹豫不决说明市场中充斥著过度的担忧情绪，那么明智的投资者应该会在近期推动市场迅速反弹。如果市场人士的投资哲学只是简单的"无为而治"，那么市场至少还需要出现一次回调才能在战术上形成一个上佳的购买机会。
上周股市又是艰苦跋涉，几乎每天都在试图前行，但最终都是以下跌终局。这让看涨和看跌双方都信心大减。
道琼斯工业股票平均价格指数下跌46点收于9966点。上周的每一个交易日，道琼斯指数盘中都站在1万点关口之上，却每每以略低于1万点的水平报收，这样的挣扎过程比每日收盘结果还令人沮丧。
标准普尔500指数上周累计下跌2点收于1093点。而那斯达克综合指数表现略胜一筹，上周累计上涨7点收于1912点。
债券收益率略有下挫，石油价格也有所回撤，这些似乎为股市上扬扫清了道路。但过去一周的股市表现并非如此。由于没有广受关注的经济报告能够吸引交易员们的关注，股市仍围绕著重大的结构性问题和投资者心理大作文章，大多数人都不知何去何从。
自4月初以来股市一路下行，从3月份的第一周至今，几大股指均未创出新高。石油价格高涨、战争丑闻频现以及公众对于美国联邦储备委员会(Federal Reserve, 简称Fed)即将开始加息的关注，都为股市蒙上了重重阴云。
一些众所周知的威胁引来了大量关注，那些认为市场正在酝酿走强的人们以此为证。
5月12日，市场在承受了沉重的抛压后曾在盘中出现一次迅速反弹，转眼之间将后市的跌幅一扫而光。当时的这一情形也为市场反弹提出了一个依据。看涨者──至少是那些认为市场会迅速回调的乐观者──认为，那天盘中创下的低点是个关键的支撑位。
就在标准普尔500指数跌向1076点这一2004年年中低点的过程中，一些累计市场广度指标（也就是将每日的上涨股减掉下跌股后的净差额累积数）创下了自2002年秋季低点以来都不曾出现过的极低水平。
在大多数交易日里，成交的看跌期权同看涨期权之比处于高位。近几周散户投资者的股市投资现金有所减少。调查显示看跌人气与日俱增。美林(Merrill Lynch)的月度全球基金经理调查显示，专业人士的谨慎态度明显增加，他们所管理的基金的现金持有量也有所增加。所有这些在反向投资者看来都是标准的牛市信号。
一些经验老到的投资者惯于在大多数人决定向左走的时候向右转，他们基于包括上文提及的因素在内的一些原因得出了这样的结论：眼下的明智之举是持有多头头寸。
Legg Mason的基金经理比尔?米勒(Bill Miller)在市场中声望颇高，原因是10多年来他的基金一直表现好于基金追随的基准指数。上周，米勒对公司内部的市场人员说，股市看上去已经见底，下一步很可能是反弹上扬。
米勒的这番话并没有公诸于世，但被那些对智者行为很感兴趣的人们传遍了市场。但也有人当即指出，米勒基金今年的表现落后于大盘。
另外还有一些特例独行的怀疑者也决定为迎接短期反弹做好准备。这其中包括Raymond James的策略师杰弗瑞?索特(Jeffrey Saut)、对冲基金Seabreeze Partners的经理道格?卡斯(Doug Kass)和《Market Strategies and Insights》的投资顾问沃尔特?迪姆(Walter Deemer)。
这些投资者均预计，即将出现的这次反弹将是一次长期熊市中的小插曲，这样的走势将挫败那些采用买进并持有策略的投资者，但为那些精明、或者说幸运的机会主义者带来回报。
上上周三的那次触底反弹曾被看作市场的吉兆。但此后的市场表现却让其他市场分析师不胜其烦。自那以后，市场的反弹都如昙花一现、中途夭折，而且成交低迷。
Natexis Bleichroeder的技术分析师约翰?罗克(John Roque)说，众多市场人士都宣称市场已经"超卖"，同时技术支撑面一直保持稳固；有鉴于此，市场迄今尚未出现一次像样反弹这一事实本身就足以令人不安了。
如今很难参透市场负面人气究竟到了什么程度。在截至5月10日的一个月中，空头头寸略有减少。尽管市场已严重超卖的说法不绝于耳，但大盘较近期高点仅仅低6%，这可能是人们对反弹并不十分担心的原因。
根据美邦(Smith Barney)分析师上周对大户投资者进行的调查，受访者对长期年回报率的平均预期为20.8%，高于去年的15.7%，从中几乎看不到投资者过度忧虑的迹象。
另外，市场对于Fed加息前景的审慎关注也是许多人按兵不动的一个原因。
比尔?米勒的另一个观点是，本轮加息不会重演1994年那边一幕：当年Fed加息让股市和债市都大吃一惊，市场普遍下跌。实际上，标准普尔500指数从高点跌落的幅度已经同1994年利率上调后的市场反应不相上下了，而随后在1995年中，该指数的表现相当出色。
1994年2月份Fed之举成了前车之鉴，而这次Fed又充分传达了其意图，因此市场已经提前完全消化了加息的影响。
但如果所有人都预见到加息前景，且都认为这将于市场无害，那么是否意味著投资者对此也过于乐观了？逆市而动从来就不是一件容易的事。
眼下和1994年的差别很多也很明显。当年，像供应管理学会指数等经济动能指标是不可能在第一次加息过后的10个月里见顶的。目前有迹象显示，这些指标将要见顶。
而且，94年的市场正处在一个强劲牛市之中，第一次加息宣布时，市场正创下新高，因此加息消息就成为了一次回调。而今，我们面对的是一个泡沫后期现金充裕的市场，似乎没有迹象显示周期性牛市会有什么大作为。
