Confidence Among Investment Managers Drops To Near A 5-Year Low

The theme lately among many of our indicators is that investors aren't necessarily turning bearish, but they sure are lacking confidence in their former bullishness.

Yet another example comes from the National Association of Investment Managers (NAAIM).  That organization reported that for the latest week, managers were modestly net long (+60%), but there was an extremely wide divergence among them.

We compute a "confidence" measure which is the standard deviation among responses.  The theory is that if managers as a group are confident (either bullish or bearish), then the standard deviation will be small.  If they're less confident in aggregate, then there will be a wide variance in how they are positioned.

The confidence level this week was only 27%.  That's among the lowest in the survey's 5-year history - in the bottom 7% of all readings.

The table below highlights all other times when the net position of the managers was moderately net long (between +50% and +80%), but confidence was extremely low (less than 30%).

We don't have a lot of precedents, due to the survey's short history and the unusual nature of the parameters.

But overall, the results were mostly positive, with one glaring exception in late 2007.  Taken alone, we probably can't read too much into this due to the limited number of occurrences.  But combined with the others we've discussed recently there is compelling evidence that skepticism among investors is extremely high.