Weekend Reading: We Are All In….Again!

Lance Roberts  |


Despite the recent angst in the market over increasing interest rates, there has been little evidence of concern by investors overall. A recent report showed that investors have the LEAST amount of cash in their investment accounts…EVER.

“Individual investors drew down cash balances at brokerage accounts to record lows as the S&P 500 surged 7.2 percent in the three months ended Friday.
Cash as a percentage of assets among Charles Schwab Corp. clients in August fell to 10.4 percent, matching the level in January that marked the lowest since at least 2004.”

Of course, eight months ago the markets suffered a 10.4% decline just as investors scrambled to “get in.”

The monthly survey from the American Association of Individual Investors shows the same. Individuals are carrying some of the highest levels in history of equities, are reducing their exposure to bonds, and carrying very low levels of cash.

As Dana Lyons recently noted:

” From the Federal Reserve’s Z.1 release, we find that U.S. Households had a reported 34.3% of their financial assets invested in the equity market as of the 2nd quarter. Outside of a slightly higher reading in the 4th quarter of 2017, that is the highest level of stock investment in the 70-plus year history of the series, other than the 1999-2000 bubble top.”

Investors are once again….“all in.”

And the market once again tumbled.

The one thing we know for sure is that individual investors do exactly the opposite of what they should when it comes to investing – “buy high” and “sell low.”

Households have repeatedly learned, and then subsequently forgotten, this lesson repeatedly over the entirety of the financial market history.

The challenge, of course, it understanding that the next major impact event, market reversion, will NOT HAVE the identical characteristics of the previous events. This is why comparing today’s market to that of 2000 or 2007 is pointless. Only the outcome will be the same.

The reality is that the majority of investors are ill-prepared for an impact event to occur. This is particularly the case in late-stage bull market cycles where complacency runs high, risk is dismissed for chasing returns, and value is displaced by momentum.

The recent sell-off was NOT the impact event. That event is still coming, and the discussion of why “this time is not like the last time” remains largely irrelevant. Whatever gains that investors garner in the between now and that next event by chasing the “bullish thesis” will largely be wiped away in the swift and brutal downdraft. The routs in February and October are only early warnings of how swift and brutal the actual event will be.

Of course, this is the sad history of individual investors in the financial markets as they are always “told to buy” but never “when to sell.”

You can do better.

Just something to think about as you catch up on your weekend reading list.


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“Investors always decide to do the same thing, at the same time, and it is usually the wrong thing.”T.R. Roberts.

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