Bullish sentiment is rising and volatility is falling.
According to Barron's, Investors Intelligence's bullish sentiment recently clocked in a 62.2%, the second highest on record. That passes the 60.8% way back in August 1987 when Greenspan came on board to run the Fed not too long before he made his fateful trip in October to Dallas for a speech. To be fair, interest rates had been rising pretty much all that summer.
The records, 62.9%, happened in 2004, only one and a half years into that bull market.
There's an old hippie joke about a hippie standing at the corner of Broad and Wall Streets snapping his finger for several hours when someone finally approached him and asks what he's doing.
"Chasing elephants away," the hippie proudly says.
"Aw, that's ridiculous," the man replies. "There's not an elephant within thousands of miles of here."
"Works don't it," the hippie says, smiling back.
Meanwhile, back at the ranch, bearish sentiment currently hovers around 17%. All the bear stew needs now is few dashes of higher interest rates.
CRAVING REVENUE
It's just not yield-hungry investors who are becoming less risk adverse. Not in the least if one can believe a recent piece in the WSJ.
Credit unions are now employing some tactics to ramp up income last seen in the last housing boom. Navy Federal Credit Union, the largest credit union in the U.S."with more than $58 billion in assets, began allowing it members in January to borrow up to 100% of the value of their home using a home-equity loan," the Journal reported.
And zero down mortgages are once again are on the rise. So far this year Navy Federal noted it had originated nearly $400 million of "mortgages for home buyers with no down payment...up 31% from the same period a year ago."
And Navy Federal is not alone. The nation's third largest credit union, Pentagon Federal, just raised the amount of equity homeowners can borrow against from 85% to 90% of a home's value. Other credit unions around the country have started pushing such plans on radio and television to pay off credit card debt or buy a new car or take a vacation, according to the Journal.
At still other credit unions the minimum required for down payments is dropping from 5% to 3% on homes up to the $400,000 level. Among many others one of the concerns such loosening of underwriting requirements worry some observers especially in what could turn out to be not just a rising interest rate cycle but one that goes up faster and farther than expected.
Many of these new loans are longer-term assets that could prove troublesome if interest rates jump significantly. And in this case given the lows we're coming off it won't take much to define significantly. Credit unions at the end of Q1 this year held about $1.0898 trillion in assets.
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