Stock Contrarians are Investing *HERE*

now we've got to talk a little bit about

the bull case and one of the things

propping up the bull case in my opinion

is what some surveys are showing about

the allocation to equities relative to

bonds and uh cash now there are two

surveys we're going to look at we're

going to look at a Bank of America

survey and we're also going to look at a

JPM survey JPMorgan Chase now what I

think is very interesting as well before

I hit those surveys is there's a lot of

talk right now about potentially

patiently going back into markets

Barclay starts off by suggesting that

maybe you can patiently go back into

markets specifically they prefer EU

stocks versus U.S equities they're

advising Care at current levels but I

thought this paragraph here was very

interesting the rates Equity Paradigm of

last year may be changing with Equity

markets now responding more to improving

growth meaning they are in a better

place to cope with higher rates right

think about that if growth maintains we

could get through higher here for longer

we think stocks can continue to climb in

the wall of worry as sentiment slash

positioning are more cautious post the

February consolidation terminal rate

expectations have been recalibrated to

realistic levels and earnings are

holding up better than feared oh my gosh

this is like a like this is like

beautiful hopium here like I'm I'm just

getting turned on by the amount of opium

this this this piece is giving me now

remember I let I cover the Bears I cover

the Bulls but this is very interesting

because they're making this argument

that hey if so many people are on the

side

it's actually really hard for you to

have a a big leg to the downside if so

many people are already sitting on the

side and we're calibrating to the idea

of higher for longer and we're

calibrating to the idea that okay guess

what we're gonna have higher interest

rates and and as long as earnings hold

up we're happy we just look for pricing

for our stocks we just go find our PP

and then we we you know ride our peepee

we write our pricing power stocks uh

through the recession they do uh say

that uh look at this I'll just read this

earnings are holding up better than fear

and investors who missed out on the

rally have dry powder to chase the rally

interesting however we're advising care

there is no free lunch yes there is a

lot of liquidity on the sidelines for

now uh Barclays is keeping a risk on

bias and of course uh you know that

while there could be a big downside they

argue quote we see little risk of a

Sharp reversal in positioning given the

current moderate exposure so they're

really making the argument like dude so

many people are bearish like

you have less downside now with how many

people are bearish

now they do argue that it looks like the

Federal Reserve you turning is far off

the self self-induced recession may be

the price to bring to pay to bring

inflation down uh and macro is certainly

volatile and and unclear right now uh

but look at this sentiment here

sentiment is not so complacent anymore

uh this is the fear greed indicator

where basically lower is more fearful

and you're seeing a change in Trend I

drew these little red lines here so this

circle I'm making on the left here shows

you people getting more fearful now

people are very slowly becoming less

fearful so you got a trend over here at

the same time Global activity rebounding

look at this Rebound in global activity

2022 straight down basically and now

you're getting that inflection point in

global activity very fascinating so this

Barclays piece was phenomenal but I want

to align this Barclays piece with what I

actually saw from from advisors and

surveys so we're going to do the B of A

survey and then we're going to do the

JPM serving so B of A survey what does

it tell us cash is King uh what do we

have for cash is King average cash

allocations Rose 10 the highest in our

survey history just 26 percent of

financial advisors plan to buy stock

with excess cash versus 42 last year so

in other words you have less people

interested in buying stocks right now

while more people are buying bonds or

staying in cash 41 of financial advisors

expect a recession starting in Q2 23 in

Q3 advisors are cautious in the near

term but they're actually bullish in the

12-month forecast

70 percent expect that the bear Market

will end in the first half or the bear

Market is already over so even though

they think either the pain is going to

be over by the second half

or the that you know the bear Market is

already over despite that they're still

allocating more money to cash and

sitting on the sidelines right now they

prefer value over growth which in my

opinion creates massive opportunities to

build an allocation in growth stocks and

Tech I want to be where people are not

you know I want to buy real estate when

everybody is afraid to buy real estate I

want to buy stocks when everybody else

is afraid to buy stocks what are people

most bearish on right now consumer

discretionary real estate and Tech well

it's not it's way too soon to buy real

estate but I think it's a perfect time

not Financial personalized Financial

advice or a guarantee for you but I

think it's a fantastic time to look for

pricing power stocks in the tech space

and maybe certain pricing power stocks

in a consumer discretionary I think

there are some by the dip opportunities

in discretionary you have to be careful

though yesterday we did an analysis on

Amazon versus let's say Etsy for example

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bonds over stocks firmly consensus

advisor Bond allocation Rose okay we

already talked about advisor Bond

allocation what do we have here near

term cost is 70 expect the market okay

we talked about that already all right

only 13 of financial advisors expect the

US economy to avoid a recession over the

next two years so it's pretty much a

foregone conclusion by financial

advisors we're going to go in a

recession

biggest tail risks recession and the FED

last year we were worried about

inflation now we're actually not worried

about inflation anymore we're actually

worried about the Central Bank just

breaking something or a recession

geopolitics are up there as well I think

geopolitics are less of a risk I don't

see a Taiwan Invasion and while Ukraine

Russia is dragging on I think that to be

a little bit more of a sort of edge

issue right now obviously that's not to

say that the loss of life is is not a

problem it is it's something we should

pay attention to but yes I agree that

the EPS write Downs are probably the

biggest issue for the market right now

and that's again why I focus on pricing

power stocks I actually think the best

way to be exposed to pricing power

stocks and yes I'm biased but it's

through a pricing power style ETF the

reason for that is if one of the pricing

power stocks runs a lot we could

basically at an ETF exchange the stock

that ran

for reallocating or rebalancing to other

stocks that are pricing power stocks

without passing on capital gains the ETF

like you pay a tiny little fee for an

ETF compared to the the potential taxes

you save to be able to rebalance you

know one stock doubles and you sell half

of it at a massive gain you're paying

like 30 percent in taxes in some cases

instantly depending on short-term

long-term whatever but if within the

wrapper of an ETF an active ETF manager

can exchange that

for a diversified basket of other

pricing power stocks and pass on no

capital gains to you because of the ETS

structure you're just holding on to the

ETF ticker and as long as it's

structured correctly when there are

plenty of gains to avoid

it's a phenomenal opportunity to avoid

taxation I mean

ETFs are awesome uh you know just over

the last few years have I become so

bullish on these but I think this is

very very interesting advisors are most

bullish on small caps

I think that's very interesting advisors

say Tina is over Tina is uh there is no

alternative for stocks right anyway with

the end of zero interest rate policies

stocks are no longer the only compelling

asset class I actually think this could

lead to a violent Resurgence in stocks

because so many people are on the

sidelines with cash you can see this

violent entrance into stocks kind of

like what we saw in January I think

you're going to see more of those

violent up moves on the Fibonacci

retracement lines look at this Equity

allocation is sitting at the lowest

levels in our survey history here's the

Bank of America survey going back to

2017. we're sitting at the lowest Equity

allocations around 57 here where usually

we're well above 60 percent I find that

very interesting uh some other charts

here look at this look at this this is a

very cool one this is Extreme

bullishness for stocks which is bearish

right and we were at that level at the

end of 21. extreme bearishness for

stocks which is actually bullish for

buying stocks you saw that sort of at

the end of 2012 12 over here so this can

go very low below Trend but look at

where we sit right now we're sitting

very close to that green line over there

so I again I like buying when other

people are fearful right Warren Buffett

be fearful of people are greedy eighty

percent of clients have higher cash

balance than before covid clients are

looking to either stay in cash or buy

bonds with excess cash so they're not

super bullish on on stocks however look

at this financial advisors advise

cautioned in the near term so more cash

and more bonds but in the long term what

do they advise bullishness on stocks

this is really fascinating my opinion

advisors also expect the FED to be less

hawkish than what the FED is pricing in

uh some suggesting with a higher

likelihood that we're already in the

recession or downturn era uh this is uh

financial advisors really expecting to

see that recession Q2 Q3 I think that

could really push out to potentially Q4

but also look at this 2023 could be a

good year for active management hey we

were just talking about that passive is

crowded Bank of America saying passive

Investments are crowded right now active

actually is not very crowded again

potentially suggesting active ETF

management could be a good idea single

stock buying out of equilibrium

all right let's now jump over to for a

moment uh I want to jump on into uh the

JPM survey and we got to jump on over to

the course member live stream China

reopening somewhat positive okay this

survey kind of keeps going on but the

the most important parts we've already

hit I want to look at the JPM survey and

then we're going to get to our course

member live stream okay ready for this

JPM survey

uh this is this the survey this is yeah

they're initially someone okay here's

the survey part so look at this survey

what is your current Equity position or

sentiment in historical terms look at

this in historical terms most bearish

zero percentile to most bullish 100

percentile the vast majority people are

sitting over here in the 20 to 40

percentile that's somewhere around 42

sitting over here 18 sitting in the

middle a much more of a bearish bias

than bullish bias for stocks right now

are you likely to increase or decrease

Equity exposure over the coming days the

blue line is planning to increase Equity

exposure look how low it is only 30

percent expecting to increase Equity

exposure in the coming days look at this

which asset class do you expect to

perform best over the next three months

equities only at eight percent people

are very bearish on equities right now

folks that's buy time in my opinion

that's freaking bye bye bye time I'm

gonna do some buying today I've decided

I I I'm gonna gonna do some buying today

I like buying so uh yeah wow uh I think

personally these surveys are making it

very very clear uh that uh you have a

lot of uh excitement

in my opinion for people who are

contrarians most people are so bearish

right now on this idea that this EPS

recession is going to be so painful so

what I like to do is I like to look at

this these surveys and say okay well if

positioning is very bearish and people

are focused on cash and bonds then I

want to be looking for pricing power

opportunities because I think pricing

power opportunities are going to do the

best

in a potential recession focusing on

higher income businesses and higher

income individuals but also if people

are mostly bearish right now maybe now's

that opportunity especially leading into

these uh this this uh era here of um of

pain as we wait for these uh these data

sets to come in you know jobs and CPI

and that so anyway that's my take really

appreciate you all being here folks

thanks so much and we'll see in the next

one goodbye