Investment letter writer and money manager Tony Boeckh may have stumbled onto one of the most exotic contrary indicators yet: tracking the number of new doom and gloom books about the stock market.
Mr. Boeckh used this indicator in a recently penned note to clients outlining why he thinks the many pundits contending that we’re mired in a long-term bear market have got it all wrong.
One of Mr. Boeckh’s claims is that the majority of stock seers are currently bearish, and the consensus view is typically incorrect because it’s likely to be already reflected in prices and therefore not much use for making money. To make decent profits, investors have to do something difficult: break from what the herd is thinking, and do the opposite.
But that leaves the thorny call of determining the consensus view. Hence his trip to book stores (both of the online and bricks and mortar variety) to look for clues.
Mr. Boeckh, who hails from Montreal and formerly was associated with BCA Research, the well-regarded market forecasting firm, analyzed current business book offerings and found titles with doomster leanings outnumbered those with an optimistic tilt by a staggering 61 to five.
“Our first reaction on seeing this overwhelmingly disproportionate number of bearish titles was to think of some past episodes which marked a major reversal of received economic and investment wisdom,” he said. Among them were the call in the late 1980s on how we should all become more like the Japanese, just before Japan crashed, and the late 1990s, when everyone thought technology was going to change the world and people should load up on Nortel. We all know what happened next: the tech bubble burst.
Here is a sampling of current titles: “The Great Crash Ahead: Strategies for a World Turned Upside Down”; “The Aftershock Investor: A Crash Course in Staying Afloat in a Sinking Economy”; “The Real Crash: America’s Coming Bankruptcy -- How to Save Yourself and Your Country”; “Never Buy Another Stock Again”; and my personal favourite: “The Moron’s Guide to Global Collapse.”
Mr. Boeckh’s conclusion: to get so many bearish titles dominating book sales, a trend has to be long established and people must be “traumatized and disillusioned with economic and financial prospects.” It sounds pretty convincing to us at Inside the Market that investors should look at the book titles and be doing the opposite.
Mr. Boeckh, by the way, figures the stock market bottom in 2009 marked the beginning of a long-term bull market. That doesn’t mean there can’t be further sell offs, but he thinks the underlying trend is for higher prices and investors should position themselves accordingly, with holdings of quality companies with good balance sheets.
So forget about being a moron and worrying about the coming global collapse. Mr. Boeckh says quality stocks “will continue to be the premier asset class to protect and enhance wealth positions over the long run.”