You people are an irrational bunch and you always have been.
You do silly things, like bid up tech stocks to infinity because you think your new and improved crystal ball works better than the one that failed you so miserably in 2000.
You chase high yield credit when prices have become completely detached from fundamentals.
You sell vol. using doomsday ETPs you don’t fully understand.
You imagine that ETFs can somehow be more liquid than the underlying.
You convince yourself that because bonds are expensive, stocks are “cheap” as though you do not understand the meaning of the word “relative” (“I bought an S600 because it was ‘cheap’ compared to a Phantom”).
You convince yourself that while $14 trillion in central bank liquidity drives risk assets to nosebleed levels, somehow the slowing or cessation of that flow won’t have the opposite effect.
And you buy avocados for $2 each.
Again, you are a gang of irrational silly people who are in the habit of getting yourselves into trouble every now and again and then acting like you don’t know how you got there when it all falls apart.
So given that you and everyone who looks like you is silly, it doesn’t surprise me to learn that when BofAML asked you if you were taking higher than normal levels of risk with markets stretched to historical extremes, so many of you answered yes that it looks like BofAML might have had to slightly adjust the damn y-axis on this chart:
And that’s hardly the end of this story. The other thing BofAML found out when they talked to you was that the net percentage of you who think equities are overvalued is at a record high, and yet your cash levels are falling:
Clearly you know you and your friends might have a problem, because according to the same global fund manager survey, you overwhelming believe that “long Nasdaq”, “short vol.” and long HY and EM bonds are crowded trades:
Further, you obviously recognize the risk that central banks could make a policy mistake (presumably tightening too fast and triggering an unwind in one of those three most crowded trades) or that VIX ETPs and robots could become self-aware one night and murder us all in our sleep. I know you recognize that because you said you did:
And yet you’re still invested, aren’t you? In fact, you’re probably still in some of the very same trades you clearly know are crowded.
But it’s fine, because it’s not like this survey represents a large cross section of market participants who are managing a lot of money. BofAML “only” surveyed 206 panelists who “only” manage a combined $610 billion in AUM.