Sentimental Analysis

Last year around this time we observed how the polls favored cash and by a large margin.

In June’s Contrarian Analysis we observed how the general public mostly favored Stocks, then cash and then Bonds and Real Estate.

Again in December 2006 we did a similar Sentimental Analysis that suggested investors favored Cash by 26%, Real Estate 23%, Stocks (I guess all markets) 22%, Other 12%, and bonds and gold each 9%.

As you can tell, the overall bullish sentiment is changing albeit slowly. In mi-2006 we still saw a strong warrant for cash and safety, to gold nevertheless oblivious.

We then saw this shift over from cash to issues of better return, i.e. the end of the Real Estate bubble and the continuation of the bull market in stocks as institutional buying was replaced by the small investor.

This has since then diminished with common folk now speculating in everything from credit swaps to Chinese equities. We are now seeing a gradual flight from the dollar (44% to a mere 8%) as many of its negative attributes are becoming known.

So what do many money-savvy web surfers think now? We turn to Yahoo! Finance

What will deliver the greatest returns in the next 12 months?

U.S. Stocks 29%
International Stocks 52%
Cash 8%
Bonds 6%
Real estate 8%

It is thus obvious that a bubble is now seen emerging in the emerging markets. Instead of Tech stocks, every investor now owns something in China and the Far East. Russia, Brazil and India are all booming.

Furthermore the fears of a slowdown or even a crash seem all that familiar to similar warnings by our very own Alan Greenspan calling “irrational exuberance” in 1997.

But this poll should be studied with caution, as many believe the worst for housing has passed. This is far from the truth. Inventories still remain high and prices not far from their peaks.

Additionally, it should be noted that houses, unlike equities, are illiquid. There is no market price to be sold at, while it takes time for homes to sell. Prices are issued periodically, not daily, and are thus subject to larger variations.

Still, there is much to look forward to in the precious metals as no polls I’ve seen from the likes of Yahoo Finance, Motley Fool or CNN Money have even given the slightest attention to them. For those investors who do hold them they either allocated it as Cash or Commodities.

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