"It's a combination of apathy and befuddlement."
That's the Reformed Broker Josh Brown's response to the notion that investors are euphoric over the Dow Jones Industrial Average (^DJI) briefly lurching over 14,000. It's also a decent description of an experienced stock veterans' reaction to the hype about a new bubble in equities.
People who lived through two different horrific crashes in the last 15 years know what bubbles look like, and this isn't it.
Scoffing at the notion that one month of $77 billion in equity inflows (January) somehow trumps $1 trillion of outflows, Brown says the most that can be said of individual investors is that they are once again considering equities. "Becoming curious" is how he puts it.
Usually the curiosity takes the form of a question followed by a quick assertion that stocks are way too high and certain to plunge at some point in the near, but unknowable, future. Brown has three things to say to those paralyzed by fear given the rumored flood into stocks by the masses.
1. Whether or not individuals are buying stocks doesn't matter.
Stocks are up 127% since 2009 with outflows every month. It will take much more than one month of investing to move the needle on the price of a stock market valued at $14 trillion, give or take.
Only on the extremes are the inflows or outflows of individual investors of any value in predicting future stock moves.
2. There's real money buying.
Endowments and institutions are the ones coming back into stocks, they're just too embarrassed to say so. Instead the punditry couches their buying in phrases like "increasing our equity allocation" or "adding risk."
Pros talking like that may as well be wearing a sandwich board announcing that they missed the rally.
3. Market timing is for suckers.
"I know people who play market timers on TV," he says, "but in reality it's a very tough game to play."
Amen. The question for those all in cash is what burning bush or lightning strike was their omen of a crisis to come. Being 100% in cash makes investors literally insane, he insists. Even people otherwise brilliant and successful start hunting for reasons to justify why they've been so cautious.
Staying half invested at least wards off the lunacy of timing and Doomsday scenarios. Leave the timing to people feigning omniscience on television.