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Stock Market Lesson: "Institutional Investors Say a Crash Can't Happen"
Even professional investors can be radically wrong

By Bob Stokes
Mon, 04 Feb 2013 16:45:00 ET
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Students of market history are familiar with often-repeated bullish quotes from around the time of the 1929 stock market top. 

One legendary example is from Yale economics professor Irving Fisher: "Stock prices have reached what looks like a permanently high plateau." -- (Oct. 17, days before the 1929 crash)
 
Lesser-known quotes include several in the days just after the 1929 market crash -- for example:
 
This crash is not going to have much effect on business.
 
Arthur Reynolds, Chairman of Continental Illinois Bank of Chicago, New York Times, Oct. 26, 1929
 
There will be no repetition of the break of yesterday. … I have no fear of another comparable decline.
 
Arthur W. Loasby, President of the Equitable Trust Company, New York Times, Oct. 25, 1929
 
So even those who head large financial institutions can be way off the mark with financial assessments. 
 
Consider recent CNBC headlines. The first quote expresses the sentiment of the founder of a large mutual fund family:
 
‘100% Return’ on Stocks in a Decade -- Feb. 1
 
The second is the view of a well-known bank analyst:
 
Bank Stocks to See 14-Year Bull Market -- Jan. 30
 
The chairman of one of the nation's largest banks believes stocks are a bargain:
 
U.S. Stocks at 'Very Good Prices' -- Jan. 24
 
Investors, including professionals, tend to get more bullish as prices climb higher. Logically, investors should become more cautious as stocks ascend. But that's almost never the case.
 
History proves that investors are the most bullish at market tops. And, as you might suspect, they're the most bearish at market bottoms.
 
EWI takes an independent view of the market.
 

 



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