Extreme pessimism hits global investors

 EmailPrint This Post Print This Post

Ian Scott, Nomura’s Global Head of Equity Strategy, argues (via Business Insider) that investors are quick to get rid of their foreign equities when fear sets in. However, these sell-offs are often followed by sharp rebounds in those very same stocks.

The chart below indicates that the current international equity flow statistics are particularly negative, which Scott views is an argument to buy. At the current level, the only time it would have been too premature to buy was during the Lehman Brothers crisis when deleveraging postponed the bottom by five months.

As an aside, as one would expect, the flow chart is a close inverse of the CBOE Volatility Index (VIX), Wall Street’s so-called “fear gauge”, i.e. increasing sales of overseas stocks (a declining trend on the chart below) correlate closely with a rising VIX.

Source: Business Insider, November 21, 2011.

Did you enjoy this post? If so, click here to subscribe to updates to Investment Postcards from Cape Town by e-mail.

OverSeas Radio Network

Leave a Reply

You can use these HTML tags

<a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>




Top 100 Financial Blogs

Recent Posts

Charts & Indexes

Gold Price (US$)

Don Coxe’s Weekly Webcast

Podcast – Dow Jones

One minute - every hour - weekdays
(requires Windows Media Player)
newsflashr network
National Debt Clock

Calendar of Posts

November 2011
« Oct Dec »

Feed the Bull