Dana Lyons Commentary – Fri 16 Mar, 2018

Household Stock Exposure Inches Closer To Dotcom Record

Here is another interesting post by our good friend Dan Lyons. While not the best timing indicator the increase in households exposure to equities is concerning. Especially when you consider how long this bull market has gone on for.

Here are a couple websites of Dana’s that you can check out.

…Here’s the post…

The percentage households’  financial assets currently invested in stocks has surged further, now exceeded only by the blow-off portion of the 2000 dotcom bubble.

Updating one of our favorite data series from the Federal Reserve’s latest Z.1 Release, we see that in the 4th quarter, household and nonprofit’s stock holdings jumped to 37.05% of their total financial assets. This is the highest percentage since the 3rd quarter of 2000. And, in fact, the only time in the history of the data (since 1945) that saw higher household stock investment than now was during the 2Q 1999 to 3Q 2000 blow-off phase of the dotcom bubble. Perhaps not everyone is in the pool, but it certainly is extremely crowded.


As we’ve discussed many times, this data series is one of our favorite metrics pertaining to the stock market. It is not necessarily an effective timing tool, but is what we call a “background” indicator. It provides an instructive representation of the longer-term backdrop — and potential — of the stock market. It also serves as an interesting lens into investor psychology. As we wrote in a September 2014 post:

“This is one of our favorite data series because it reveals a lot about not only investment levels but investor psychology as well. When investors have had positive recent experiences in the stock market, i.e., a bull market, they have been happy to pour money into stocks. It is consistent with all of the evidence of performance-chasing pointed out by many.

Note how stock investment peaked with major tops in 1966, 1968, 1972, 2000 and 2007. Of course, investment will rise merely with the appreciation of the market; however, we also observe disproportionate jumps in investment levels near tops as well. Note the spikes at the 1968 and 1972 tops and, most egregiously, at the 2000 top.

On the flip side, when investors have bad recent experiences with stocks, it negatively effects investment flows, and in a more profound way than the positive effect. This is consistent with the scientifically proven notion we’ve discussed before that feelings of fear or loss are much stronger than those of greed or gain. Stock investment during he 1966-82 secular bear market provides a good example of this.

After stock investment peaked at 31% in 1968 (by the way, after many of the indexes had topped in 1966 — investors were still buying the dip), it embarked on steady decline over the next 14 years. This, despite the fact the stock market drifted sideways during that time. By the beginning of the secular bull market in 1982, the S&P 500 was right where it was in 1968. However, household stock investment was at an all-time low of 10.9%. If the stock averages drifted sideways, why did stock investment drop by two thirds? The repeated declines over that period left investors scorned and distrustful of the stock market. They never really started putting money back into stocks until 1991.

What is the significance of the current reading? As we mentioned, it is the highest reading since 2000. Considering the markets are at an all-time high, this should not be surprising. In fact, while most of the indexes surpassed their prior peaks in early 2013, household stock investment did not surpass the 2007 highs until the 2nd quarter of this year (2014). The financial crisis put a dent in many investors’ psyches (along with their portfolios) and they’ve been slow to return again. However, along with market appreciation, investor flows have seen at least streaks of exuberance over the past 18 months, boosting investment levels.

Yes, there is still room to go (less than 5 percentage points now) to reach the bubble highs of 2000. However, one flawed behavioral practice we see time and time again is gauging context and probability based on outlier readings. This is the case in many walks of life from government budgeting to homeowner psychology to analyzing equity valuations. The fact that we are below the highest reading of all-time in stock investment should not lead one’s primary conclusion to be that there is still plenty of room to go to reach those levels.

There are no doubt many investors who are still wary of returning to the stock market due to the two cyclical bear markets in the past dozen years. However, while there may be a certain level of investor mistrust, the moniker of “most hated bull market of all-time” does not seem appropriate. It should not be lost on investors that we are at the second highest level of stock investment ever, behind only the most speculative stock blowoff in U.S. history.”

If you’re interested in the “all-access” version of our charts and research, please check out our new site, The Lyons Share. You can follow our investment process and posture every day — including insights into what we’re looking to buy and sell and when. Thanks for reading!


Disclaimer: JLFMI’s actual investment decisions are based on our proprietary models. The conclusions based on the study in this letter may or may not be consistent with JLFMI’s actual investment posture at any given time. Additionally, the commentary provided here is for informational purposes only and should not be taken as a recommendation to invest in any specific securities or according to any specific methodologies. Proper due diligence should be performed before investing in any investment vehicle. There is a risk of loss involved in all investments.

Dana Lyons
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    • On March 16, 2018 at 11:39 am,
      irishtony says:

      WOW…CFS this is crazy.
      Its my opinion that all the students who walked out of school should be susspended.
      I also think the teachers who went along with it , should be fired.
      They are in school to get a education , not to be turned into political firebrands, for the powers that be that want to ban guns , for their protection, ( the powers that be )

      • On March 16, 2018 at 11:42 am,
        CFS says:

        But the teachers are Unionized Trump-Haters….

        (At least the UK teachers union is correctly named.)

      • On March 16, 2018 at 12:35 pm,
        b says:

        I guess remington stock has been dropping.
        said on tv news.

        funds have begun to distance themselves of weapons stocks.

      • On March 16, 2018 at 1:30 pm,
        OOTB Jerry says:

        Ditto ……….on CRAZY>>>>>>

    • On March 16, 2018 at 12:08 pm,
      bonzo barzini says:

      At Oxford U. the Philosophy Dept. has ordered that 40% of its reading assignments must be written by females. The lunatics have taken over.

      • On March 16, 2018 at 12:26 pm,
        CFS says:

        As I said in the UK.
        National Union of Teachers,
        or NUTs.

        • On March 16, 2018 at 12:32 pm,
          CFS says:

          (I also hate to admit that for several years I was on the faculty of an Oxford College, which I will not name for the sake of anonymity.)

          • On March 16, 2018 at 1:08 pm,
            bonzo barzini says:

            Were you in the philosophy dept.?

          • On March 16, 2018 at 2:05 pm,
            CFS says:

            I have a B.A. in Philosophy, but my Ph.D. is in Physics.

          • On March 16, 2018 at 2:37 pm,
            bonzo barzini says:

            How many female philosophers did you study at Oxford?

      • On March 16, 2018 at 1:10 pm,
        bonzo barzini says:

        Nietsche said, “Women are not deep; they are not even shallow.” I guess he will be banned at Oxford now…

    • On March 16, 2018 at 2:24 pm,
      Wayne says:

      Marxist Communists oppose the call to “Abolish Gubmint Skools!”

  1. On March 16, 2018 at 11:36 am,
    CFS says:

    off topic:
    Clif High on Rogue Money:

  2. On March 16, 2018 at 11:40 am,
    CFS says:
  3. On March 16, 2018 at 12:11 pm,
    CFS says:

    Off Topic:

    Clinton investigation cover-up:
    JudicialWatch commentary:

    • On March 16, 2018 at 2:01 pm,
      Robert Moriarty says:


      Jeff Sessions has this weekend to vote on either draining the swamp or stocking up on bath salts for his dip in the pond. He has to determine if he should follow the recommendations of the FBI’s Dept of Professional Responsibility to fire Andrew McCabe before his retirement takes effect on Sunday.

      In short, it’s either help drain the swamp or join in the swimming party.

      Martha Stewart went to jail for doing less than McCabe did. If McCabe is not fired, it’s all over for hopes of the Trump administration draining even a portion of the swamp.

      • On March 16, 2018 at 2:53 pm,
        OOTB Jerry says:

        Agree on many of your points……..especially on Sessions……

      • On March 16, 2018 at 2:59 pm,
        irishtony says:

        Hi Robert.I dont believe mccabe will be fired before sunday.
        Why ? Because he knows the dirt on alot of the other swampers, they all know the dirt on each other, thats why none of them betray the club ( Its a sort of an insurance policy to protect each other ) He may have said to Sessions, fire me & i will write a book spilling the beans & i will go on a media tour shouting my mouth off……..Eighter way i am going to end up with my retirement fund.

        • On March 16, 2018 at 5:47 pm,
          Robert Moriarty says:


          I think you nailed it. I have been baffled for months about how Clinton seems to have dodged the bullet time after time. I am coming to the conclusion that she knows something so important that it could start a revolution overnight and has promised her own version of the “Samson Option” if she gets indicted.

          It’s probably a threat to reveal who was really behind 911. I think that if Americans knew, the revolution would start tomorrow.

          • On March 16, 2018 at 9:24 pm,
            b says:

            I dont believe the revolution would start tomorrow.

            That thought goes back a long way, the people prefer to believe in magic bullets, planes that knock down buildings and tooth fairys.
            Heck according to the National Science Foundation 1 in 4 Americans believe the sun revolves around the Earth.

            The people wont do a thing, the “elites” know that, there has to be another reason.

        • On March 16, 2018 at 5:50 pm,
          CFS says:

          St Patrick’s Day is coming up ….Happy Paddy’s Day.

          Irish maths test!

          Paddy wants a job, but the foreman won’t hire him until he passes a little maths test.

          Here is your first question, the foreman said. “Without using numbers, represent the number 9.”

          “Without numbers?” Paddy says? “Dat’s easy.” And proceeds to draw three trees.

          “What’s this?” the boss asks.

          “Have you no brain? Tree and tree plus tree makes 9” says Paddy.

          “Fair enough,” says the boss. “Here’s your second question. Use the same rules, but this time the number is 99.”

          Paddy stares into space for a while, then picks up the picture that he has just drawn and makes a smudge on each tree… “Ere ye go.”

          The boss scratches his head and says, “How on earth do you get that to represent 99?”

          “Each of them trees is dirty now. So, it’s dirty tree, and dirty tree, plus dirty tree. Dat makes 99.”

          The boss is getting worried that he’s going to actually have to hire Paddy, so he says, “All right, last question. Same rules again, but represent the number 100.”

          Paddy stares into space some more, then he picks up the picture again and makes a little mark at the base of each tree and says, “Ere ye go. One hundred.”

          The boss looks at the attempt. “You must be nuts if you think that represents a hundred!”

          Paddy leans forward and points to the marks at the base of each tree and whispers, “A little dog came along and pooped by each tree.

          So now you got dirty tree and a turd, dirty tree and a turd, and dirty tree and a turd, which makes ONE HUNDRED!”

          Paddy is the new supervisor.

          • On March 16, 2018 at 9:34 pm,
            Excelsior says:

            Erin Go Bragh

      • On March 16, 2018 at 4:22 pm,
        CFS says:

        Rumor is that Sessions has been seeking all kinds of indictments and is very busy.

        (Including going after pedophiles in Government)

      • On March 16, 2018 at 4:27 pm,
        CFS says:

        Mr. Moriarty, I partly agree with you.

        But McCabe is wealthy, so killing his pension is only a token punishment.

        It is possible he has been giving information to Sessions, so I don’t know if the absence of an official firing is necessarily implicative of anything.

        • On March 16, 2018 at 5:36 pm,
          OOTB Jerry says:

          He was acting like a cry baby about not getting his pension. If, he is so wealthy, …he should just donate it , like Trump donated his salary as Pres…..

        • On March 16, 2018 at 5:42 pm,
          Robert Moriarty says:

          When you drain the sink, you have to pull the drain plug. He didn’t. It would have sent the most wonderful message to the rest of the swamp critters.

  4. On March 16, 2018 at 2:38 pm,
    Excelsior says:

    John Quakes – quakes99

    > World Nuclear Association’s Weekly Update:

    “2 new reactors brought online in #Russia & #China brings them to 38 reactors each; #India & #France to expedite construction of 6 new reactors at Jaitapur; #Japan restarts a 6th reactor. #uranium #U3O8”