Dumb money likes stocks, sees no recession. Oh-oh!

Dumb money (retail) is piling into the market again. And nobody’s looking for a recession. This should concern us as contrarian investors. Meanwhile, seasonality can suggest a better than average summer in an election year…unless its a 2nd term president. Finally, Canada has a Dunning–Kruger problem. Find out what that means, and how it’s effected our economy. Enjoy!

Dumb money

Seems like dumb-money is leaving safer funds to buy equities….

Investment Executive: “CI Financial Corp. experienced redemptions of $1.3 billion in its Canadian retail asset management business in the first quarter, due primarily to outflows from balanced funds and cash-like products”

Dumb money rule of thumb: Wrong at the extremes…too few bears right now.

Smart/Dumb Money diverging negatively:

Recession

Nah. It’ll never happen….

Contrarian indictor. Bank America: At the bottom of the bear in October of 2022, a Bank of America survey found close to 70% of investors expected some sort of hard landing. Last week that number touched only 7%.

BearTraps: “Investors wearing that extreme pessimism about the economic outlook in Q4 2022, were just as wrong as today’s optimists in Q2 2024.”

CIO Credit Hedge Fund: “Mentions of “soft landing” in the media, they peaked in 1990, 1993-94, 2000, 2007 all before recessions and today were are at near those same levels. Right before every recession, no one could see it. Investors were highly optimistic. ” 

Here’s a Google Trends chart for the term “soft landings” over the past month. The search was virtually non existent for the past few months, then suddenly is picking up. The crowd at work!

Election years

In an election year, the party in power and their media pawns will do whatever they can to sell the voters the best possible economic outlook. Watch for media love for the incumbents in the USA this year, and Canada next year.

 

Chart below (Equity clock) suggests shows all years (green) vs election years (blue) and 2nd term in election year (red). On average, election years show rising markets over the summer vs mot years being flat. However, second term presidents, not so much.

Canada’s Dunning-Kruger problem

I’m not alone in calling out the 8 years of fiscal imprudence in Canada. You know the statistics surrounding debt, inflation , productivity, employment, housing, mass immigration, taxation, GDP, punishing environmental idealism, nonstop scandals, etc. Why would Canadians hire a Drama Teacher as PM and a Liberal Arts Major for the Finance Minister?

Why would they even apply for the job?

Here’s why:

Dunning–Kruger effect (Wikipedia): A cognitive bias in which people with limited competence in a particular domain overestimate their abilities.

GDP/Capita comparatives. 

Canada Worst of the G7. Good job, Team Trudeau!

Germany close behind.

Of note: Germany bet on green energy and was relying on foreign oil (Russia). Sound familiar? Canada is squashing our oil industry to “go green” – then we import Crude Petroleum from United States ($11.8B), Saudi Arabia ($2.38B), Nigeria ($1.11B), Angola ($545M), and Norway ($486M). Source OEC.

Canadian GDP worst in 35 years. Good job, Team Trudeau! 

Canada Business insolvencies at record highs. Good job, Team Trudeau!

Canada – Dead last, again: Productivity. Good job, Team Trudeau!

As someone said to me recently: Sophie got rid of him. Why can’t we?

One Comment

  • Thanks Keith! Always enjoy your truthful comments on Canada’s federal leadership accomplishments. Wish you had a lot more clout with your S. Ontario & Quebec “red comrades” and could get them to understand this and quit voting for “Team Trudeau”.

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

Never miss another blog post!

Get the SmartBounce blog posts delivered directly to your inbox.

Topics

Topics

Recent Posts

Keith's On Demand Technical Analysis course is now available online

Scroll to Top