What are Individual Investors Saying and Doing?

Looks to me like they're not buying into this bull market, at least not yet. The S&P500 has more than doubled in 3 years. But the individual investor is still disgusted and could not care less.

According to the good folks at Bespoke Investment Group, "It seems as though no matter what the market does, individual investors remain reticent to embrace the bull market.  With the exception of just one week in February, the weekly bullish sentiment survey from the American Association of Individual Investors (AAII) has been under 50% for the last year!"

Even with the S&P500 making fresh Bull Market highs this week, the most recent survey shows that bullish sentiment dropped again from 45.6% down to 42.4%:

This is what they're saying.

So what are they doing?

Barry Ritholtz at the Big Picture Blog wrote today that, "Despite the recent Goldman Sachs decree that this is the best possible time to be buying equities, the public is not participating" (See 'Calling All Muppets' @ WSJ).

Barry posted charts from Bianco Research showing the Net New Cash Flows into a variety of Equity Mutual Funds: Domestic, World, Hybrid and the combination of all of them. Individual Investors still aren't buying. (Check out the data at The Big Picture)

So what do we make of all of this?

I was taught early in my career that the individual investor is usually wrong, especially at turning points. Can we consider this a "turning point", even three years in? I don't think so. But I do believe that we should take this individual investor skepticism as a net positive for stocks. If you're bullish on the stock market, would you prefer your neighbor questioning your views or telling you that, "You need to be buying Tech bro!! Decade highs in the Q's! Load the boat"?

A cab driver the other day did tell me that I should start buying cotton. That was weird. Anyway, the majority of conversations that I have with friends in the industry are actually more of the same: "But JC what about Greece?", "What about the amount of debt that this country has?", "What if a bad headline comes out?", "How are these banks going to make money?", "Obama.....", "This market is about to crash, how do you not see that?".....

I'm not even joking. It's very rare that I'm having drinks with a colleague who is long and strong and willing to admit that he/she isn't long enough. Granted, some of this is anecdotal, but there is some hard evidence out there that the retail investor is still out and waiting for a chance to get it. Maybe that's why the stock market continues higher and higher without a pause, to frustrate as many participants as possible. As usual.

Bottom line: I have to take this lack of participation as a good thing for stocks. What do you guys think?

Sources:

Bullish Sentiment Declines (Bespoke)

The Public Is Still Not Buying Equity Mutual Funds (TBP)

Tags: $SPY $ES_F $SPX $QQQ $NDX