market folly

It's been a while since we've checked in on market strategist Jeff Saut so we wanted to highlight his commentary this week.  Entitled "A Kid's Market," Saut's latest piece examines how many investors are underperforming the S&P 500 this year.

Saut has noticed that many market observers have pointed to market leaders such as Apple (AAPL) selling off.  He does not believe that this is the predecessor of a major stock market decline.

He goes on to make the observation that, "trading volume is abysmal, suggesting portfolio managers are still too defensively positioned.  That gleaning is reinforced by an insufficient net-long position in the hedge fund community of only 46.5%, as well as a five-year high 'short sale' position."

Most hedge fund exposure reports we've seen have L/S funds ranging from 20-45% net long.  While this is only a small sampling, many we've seen are actually below the number Saut reports (around 20-30% net long).  One that's in line with Saut's findings is Dan Loeb's Third Point, whose exposure report we recently posted.

Saut believes the upcoming earnings season will not disappoint and thinks any pullbacks will be contained.  We've highlighted his previous thoughts on performance anxiety where maybe the most painful move in the markets is heading even higher.

Embedded below is Jeff Saut's market commentary for this week:




You can download a .pdf copy here.

If you disagree and think the market is headed lower, check out Saut on the philosophy of market tops.