Stocktake

Compiled by PROINSIAS O'MAHONY

Grantham the perma-bear now almost bullish

INVESTING legend Jeremy Grantham is sometimes labelled a perma-bear, because he has been bearish on US equities for most of the past two decades and predicted both the bursting of the dotcom bubble in 2000 and the credit bubble in 2007.

The label is false, as his latest quarterly letter reveals. The S&P 500 is "materially overpriced" but the "high-quality quartile" are fairly priced and, despite the strong global rally in recent months, the rest of the world's equities remain "slightly cheap" and offer a higher average return than normal.

"This is not exactly whoopee time, but compared to the typical overpricing of the last 20 years, it's not bad at all," concludes Grantham.

Sentiment up but near market lows

STOCKS may be flying high but wealthy and institutional investors remain fearful of a market crash, according to the Yale Crash Confidence Index. The monthly survey reveals that sentiment has picked up slightly since the start of 2012 but remains much closer to 2009 lows than 2011 highs.

It's surprising, as extremely low readings tend to occur when markets are tanking. Previous lows occurred after 9/11, just after the dotcom crash ended in late 2002, and in March 2009, when the lowest-ever reading was recorded just as the market bottomed. Accordingly, the survey will cheer contrarians. The old Wall Street adage says bull markets climb a wall of worry, and that's what has been happening.

Wall Street's finest cry poor mouth

SMALLER bonuses mean Wall Street's finest are crying poverty, according to Bloomberg last week. "I can't imagine what I'm going to do," said Andrew Schiff, brother of author Peter Schiff. His 2011 earnings - $350,000 - fell below $200,000 after deductions. "I feel stuck. The New York I wanted is still just beyond my reach."

"People who don't have money don't understand the stress," said Alan Dlugash, a partner at an accounting firm. "Could you imagine what it's like to say, I got three kids in private school, I have to think about pulling them out?"

Wall Street headhunter Daniel Arbeeny no longer goes on luxury ski trips. Instead, he tries to find good prices for Wheat Chex, his favourite cereal. Financial veterans now only make about $500,000 annually, he said. "These people never dreamed they'd be making $500,000 a year." You couldn't make it up.

Hovering around round numbers

THE DOW Jones' charge has halted just shy of the 13,000 level, where it has been hovering for a few weeks.

Co-incidence? Commentator Mark Hulbert cites a 1993 study which found that the index behaves differently around round numbers, taking longer to move through a multiple of 100 or 1,000 than any other level. Once a breakout above such levels occurs, the pace of change speeds up.

The researchers found no such pattern in the little known Wilshire 5000 Total Market Index, leading them to conclude that investors' own psychological perception of Dow price barriers created a self-fulfilling prophecy.