Stocks look better than gold for 2008

I commented on GOLD during the last couple of months. Let's see whether Gold contrarians will be right during this year as I also think that GOLD is in huge bubble mode which is ready to burst as Real Estate bubble.


Stocks look better than gold for 2008 - Mark Hulbert
Commentary: Contrarians bet equities will outshine gold
By the way, contrarians got it right in their forecast for calendar 2006 as well. Two years ago, at the end of 2005, a contrarian analysis of newsletter sentiment concluded that gold would outperform equities in 2006.

But that's water under the bridge. What about 2008?

Consider first the latest readings of the Hulbert Stock Newsletter Sentiment Index (HSNSI), which reflects the average stock market exposure of a group of short-term stock market timing newsletters tracked by the Hulbert Financial Digest. As of the end of December, the HSNSI stood at 28.7%.

When I wrote my year-ago column, in contrast, the HSNSI stood at 64.9%. So over the past year, during which the Dow tacked on more than 800 points, the editor of the average short-term market timing newsletter reduced his recommended exposure level by more than 36 percentage points.

Those are encouraging trends, from a contrarian point of view.
Now consider the latest readings of the Hulbert Gold Newsletter Sentiment Index (HGNSI), which reflects the average gold-market exposure among a group of short-term gold timing newsletters. As of Monday night, the HGNSI stood at 66.1%. That's 25 percentage points higher than where this gold sentiment index stood one year ago.

To be sure, given gold bullion's strength during calendar 2007, during which a price of an ounce rose by more than $200, an increase in bullishness is entirely normal. Still, at 66.1%, the HGNSI is getting within shouting distance of levels that would indicate a lot of optimism and euphoria among the gold timers.

On the contrarian grounds that markets like to climb walls of worry, the stock market would appear to have a lot more upside potential than gold.

Note carefully that this forecast focuses on relative performance, and thus does not mean that gold will necessarily have a terrible year. The contrarian forecast for 2008 could turn out to be correct with both stocks and gold rising, for example, but with stocks rising even more.
And, by the same token, this forecast does not mean that stocks will necessarily have a great year. It could also turn out to be correct with stocks having a mediocre year, or worse, but with gold have an even worse year. End of Story

Mark Hulbert is the founder of Hulbert Financial Digest in Annandale, Va. He has been tracking the advice of more than 160 financial newsletters since 1980.