Investors Are More Bullish Than In 99% Of All Periods Since 2002.

According to the firm’s Bull & Bear Index, which tracks sentiment using indicators like hedge fund market exposure, fund flows, long-only investor positioning and so forth, investors are more bullish than they were in 99% of periods since 2002.

The current B&B reading is 9.6 (on a scale of 0 for max bearish and 10 for max bullish). It suggests investor sentiment is currently more bullish than 99% of all readings since 2002. Extreme bullishness is characterized by robust inflows to EM equity funds, overbought high-yield credit markets relative to treasuries and aggressive hedge fund positions for a weaker yen and stronger oil prices.

What’s even worse. This extreme surge in bullishness comes even as there’s been a breakdown of late in the economic data, as measured by the BofA/ML Economic Surprise Index.

Thus bulls should have reason to worry. Everyone is bullish, and lately he data isn’t holding up so hot, relative to expectations.

In the meantime, the moment of truth for the economy approaches: HERE

JAPANESE STOCKS SOAR AFTER TWO-DECADE DROP

Japan’s stock market has taken off, with the Nikkei Stock Average soaring more than 30 percent since Nov. 14 to a four-year high.

That ascent follows just a brief little 22-year decline.

In fact, investors have poured money into Japan equity funds in 10 of the last 12 weeks, according to EPFR Global data cited by The Journal. Net inflows totaled $3.09 billion during the perio

The rise has come amid optimism over new Prime Minister Shinzo Abe’s economic stimulus plans. 

They include a weaker yen, which is boosting the fortune of Japan’s big exporters like Sony, Panasonic and Toyota. A falling currency helps a country’s exports by making them cheaper in foreign currency terms.

Goldman Sachs analysts figure that Japanese exporters’ profit rise 7 to 10 percent for every 10 yen that the dollar rises, The Wall Street Journal reports.

The dollar hit a 2 ½-year high of 94.06 yen this week.

“The stock story has mostly been a yen-driven phenomenon, no question,” Naoki Fujiwara, a fund manager at Shinkin Asset Management, tells The Journal. “Some investors are finding that they can’t afford to remain on the sidelines.”

Lorne Steinberg, chief executive of Lorne Steinberg Wealth Management in Montreal, believes the market will keep rising. “We could be looking at a two-to-three year equity market rally,” he says.
Construction companies have registered the highest risk-adjusted return among Japanese stocks since an earthquake and tsunami hit the country on March 10, 2011, according to Bloomberg.

“Public works investment will be robust in the long term when you consider the government’s plan to strengthen infrastructure,” Masaru Hamasaki, chief strategist at Toyota Asset Management, tells Bloomberg. 

“That’s highly likely to give construction companies a stable revenue source.”

However, Japan’s public debt is more than twice the size of the economy.

“You can’t keep expanding public works when you think about Japan’s fiscal situation,” Isao Kubo, a Tokyo-based equity strategist at Nissay Asset Management, tells Bloomberg. “There’s been support for construction stocks since the earthquake, but I don’t think it will last long.” 

Money News: The ‘Unthinkable’ Could Happen — Wall Street Journal. Prepare for Meltdown