% of Americans Invested in Stock Market Keeps Falling

[WarrenWatsa]

Why is this not massively bullish?

 

Not saying it is, just throwing it out there...

 

http://img829.imageshack.us/img829/9002/massivelybullish.png

 

Uploaded with ImageShack.us

 

Source: http://economix.blogs.nytimes.com/2013/05/08/stock-markets-rise-but-half-of-americans-dont-benefit/

[constructive]

I think a lot of it is demographic, not sentiment. If it was sentiment, it would be bullish.

 

http://home.comcast.net/~clawedlemew1/census2.gif

http://www.aei-ideas.org/wp-content/uploads/2013/03/lfpr11-600x427.jpg

http://blogs.lclark.edu/hart-landsberg/files/2012/03/real-wage-and-salary-disbursements-per-capita.jpg

[TwoCitiesCapital]

I don't think it is necessarily for a near term catalyst. Think of major demographic trends occurring right now:

1) Boomers are retiring.  Many can't live off the interest income from their portfolio and will need to sell stocks and bonds if they can't find another way to supplement their income. 

2) The current generation of graduates are graduating with the highest debt loads and the lowest real wages in the past decade or two. I know many recent graduates who can't afford to move out of their parents' house, let alone begin investing in a meaningful way.

 

3) Even if this trend were to reverse,  I'm not sure it would be enough to counteract boomers selling increasingly large positions as time goes on. 

 

The stock market may go up, but I don't think this will be the reason nor do I think there will be a reversal of this trend anytime soon

[JSArbitrage]

Well, there is a lot of private sector deleveraging going on meaning that any excess cash is going to pay down debt instead of investing.

[TwoCitiesCapital]

Something that I meant to include in my original post: your shouldn't be contrarian for contrarianism's sake. There needs to be a fundamental reason. You could argue that the number going back up to where it was should be bullish, but then the converse should hold true of them coming down being bearish. The stock market has risen quite a bit over the past 4 years. Either QE has been enough to overcome deleveraging, a sluggish economy, and this trend or this trend has very little impact.

 

Its not just about the supply and demand of people buying stocks; the price is set by the marginal buyer. This number could fall to as low as 10%, but if the market P/E were 1000 and the next marginal buyer was unwilling to pay that amount, prices are coming down regardless of how underowned stocks were.

[stylized_fact]

Demographics and delevering aside, some of this appears to be sentiment driven if you believe the time series reported below for ratings of quality in long term investments:

 

http://www.gallup.com/poll/147206/stock-market-investments-lowest-1999.aspx

 

When I look on meetup.com, I see tons of groups that gather to discus real estate investing, and a much smaller selection of folks interested in things like FX and charts/technical analysis.