Recently I was asked where we are in the cycle of investor emotion between the extremes of “euphoria” and “depression”. This is a good question, as knowing where the investment crowd is at and being wary of it is essential to successful investing. The 1980s Japanese bubble, the Asian miracle of the mid-1990s, US tech stocks in the late 1990s, US housing in the mid-2000s and arguably the commodity boom early this decade all had one thing in common: investors jumped on a bandwagon, resulting in assets overvalued assets, over-loved and ripe for a crash. But how do crowds get into such a muddle and what are they telling us now? A broad composite measure of US investor sentiment that includes surveys of investment newsletter writers and the ratio of puts to calls amongst retail investors is positive, but a long way from euphoria. Read Oliver’s Insights to find out how Australia’s sentiment looks, and the implications for investors: (VIEW LINK)
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