“Is all this stock
market optimism a red flag?”
Contrarians – investors
who bet against prevailing market trends – were probably nodding along as they
read that headline in The Wall Street
Journal back on January 18, 2013. The
Journal cited the American
Association of Individual Investor’s (AAII’s)
Sentiment Survey, which showed about
46 percent of participants were feeling bullish. As it turned out, the bulls
were right. The Standard & Poor’s 500 Index rose from about 1486 to about
2040 through the end of last week.
You may recall, two
weeks ago, the AAII Sentiment Survey showed investor
pessimism at a nine-year low with just 15 percent of participants growling like
bears. Well, last week, pessimism rebounded and optimism moved higher, too. The
survey results were:
·
Bullish: 57.9 percent, up 5.2 percentage points from
the prior week
·
Neutral: 22.8 percent, down 9.5 percentage points from
the prior week
·
Bearish: 19.3 percent, up 4.3 percentage points from the
prior week
The
historic average for the survey is bullish 39.0 percent, neutral 30.5 percent,
and bearish 30.5 percent.
Americans
are feeling pretty confident about the stock market’s potential and that’s not
always a positive sign. Expectations of
Returns and Expected Returns, a paper published by Robin Greenwood and
Andrei Shleifer of Harvard University, compared investors’ expectations for
returns to what financial economists
call expected returns (which are calculated
using dividends, consumption, and market valuations). They crunched numbers for
data collected between 1963 and 2011 and found expectations for returns and
expected returns tend to be negatively correlated. “…Both expectations of
returns and [financial economists’ expected returns] predict future stock
market returns, but with opposite signs. When [financial economists’ expected
returns] are high, market returns are on average high; when [investors’]
expectations of returns are high, market returns are on average low.”
So,
since investor expectations are high, will U.S. stock markets returns be low? There
is no way to know. Whether you’re a bull or a bear, in times like these, it’s
good to have a well-diversified portfolio.
'THE
NEW HIRE'
is the name of a September survey published by PwC. It’s not about how to make newly-hired people more comfortable
and productive. It’s about how the R generation – the latest iteration of
industrial robots – is transforming manufacturing. More than one-half of the
120 manufacturing firms surveyed already have adopted robotics technologies.
Auto manufacturers employ robots, as do food; consumer goods; life sciences,
pharmaceutical, and biomedical; and metals companies.
PwC predicts the shift
to robots will create new jobs for engineers specializing in robots and
robotics operating systems. It also is likely to result in the displacement of
a fair number of human workers. Currently there are about 1.5 million
‘intelligent industrial work assistants’ laboring around the world. About
230,000 are employed in the United States. According to The New Hire report:
“Industrial robots are on the verge of
revolutionizing manufacturing. As they become smarter, faster and cheaper,
they’re being called upon to do more – well beyond traditional repetitive,
onerous, or even dangerous tasks such as welding and materials handling.
They’re taking on more “human” capabilities and traits such as sensing,
dexterity, memory, trainability, and object recognition. As a result, they’re
taking on more jobs – such as picking and packaging, testing or inspecting
products, or assembling minute electronics.”
That
may be a little optimistic. Last month, Popular
Mechanics reported engineers have been working on mechanical
first-responders, like bomb-defusing and investigator robots, to help with
threats like Ebola and the Fukushima nuclear power plant disaster. The magazine
found robots competing in the DARPA Robotics Challenge were more like toddlers
and less like capable adults. “For a typical task in the event, turning a
valve, a team of several people required an hour or more to prep the robot, and
that same team had to stand at the ready to catch their bot when it stumbled
(which happened often).”
Weekly Focus – Think About It
“All
the world's a stage, and all the men and women merely players: they have their
exits and their entrances; and one man in his time plays many parts, his acts
being seven ages.”
--William Shakespeare, English playwright and poet
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