Everybody lies – including investors. Watch what they do, not what they say.

In polls, as in real life, people want to claim the best about themselves – whether or not it's true.

Michael Lavine / FOX / File
British actor Hugh Laurie as Dr. Gregory House, title character of a popular medical mystery drama inspired by Sherlock Holmes. Dr. House likes to say that 'Everybody lies,' whether about their medical conditions or their finances. So maybe we should stop reading what investors tell pollsters and start watching what they actually do with their money.

Investors are telling pollsters one thing but doing something very different in terms of their portfolio allocations. I dropped a guest post on CNBC today that illuminates what's really going on.



Brown: Watch What Investors Do, Not What They Say

I'm going to let you in on a few little secrets about investor sentiment polls:

  • They're only consequential at extreme readings.
  • They're useless in the absence of other data.
  • They often conflict with other sentiment polls taken at the same exact time.

But by far the most important thing you need to understand when presented with sentiment studies is that people tend to answer these things in alignment with who they want to be rather than who they really are.

In polls, as in real life, the profligate spender wants to convince himself and others that he is miserly, the most reckless wish to outwardly convey a sense of prudence, and so on.

With that in mind, two articles that came out last week purport to give us a read on what the individual investor is up to at this juncture. They are highly contradictory, a textbook case of the investor class saying one thing and then doing another.

Read the rest:

Watch What Investors Do, Not What They Say (CNBC)

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