Is the retail investor really back? The Wall Street Journal ran a front-page story this morning noting that the retail investor has returned to stocks.
While much of the story was based on anecdotal observations, there is certainly more money going into stock mutual funds this year. I'm just not sure it is the tidal wave everyone has been waiting for.
According to Lipper, stock mutual funds have seen inflows of $167 billion so far in 2013, after outflows in 2011 and 2012. That's good news, but it is hardly a surge. Although $167 billion seems like a lot of money--and it is--it is only about two percent of the $7.2 trillion in stock mutual funds. That is not a tidal wave.
And what about the "Great Rotation" out of stocks into bonds? Not yet. Taxable bond mutual funds have also seen inflows of $42.5 billion this year, continuing a streak that goes back to the financial crisis.
The concern that optimism on the markets is increasing is real. Sentiment is certainly improving. Put/call ratios, volatility indexes, and surveys of investor bull/bear sentiment are all flashing complacency.
Citi's analyst, Tobias Levkovich, sent a note this morning declaring "the Panic/Euphoria Model is sending a clear warning sign of substantial complacency." This proprietary indicator, he claims, is not yet in Euphoria territory, but even where it is now, there is an 80 percent chance of a decline in the markets in the next year.
However, that's a long time--a year. Meanwhile, he doesn't say how big a market decline it might be.
Euphoria doesn't necessarily mean declines. Ron Baron held his annual investment conference (at Lincoln Center) over the weekend, and reports indicate he remains bullish on stocks, expecting inflation to pick up and expecting stocks to continue to outperform.
1) Most of the world is up, though a few emerging markets like Indonesia are down; the Phillipines down 1.4 percent on the heels of that devastating typhoon.
2) Will the Federal Reserve begin tapering in December? There was a lot of confusion Friday, with stocks rallying and bond yields moving up.
What does this mean? Is the Fed tapering or not in December? This was widely discussed over the weekend, but many traders passed around comments Fed Chair Ben Bernanke made at an IMF panel discussion: "I think the unemployment rate probably understates the degree of slack in the labor market," he said. While he wasn't specifically referring to the October jobs report, this was widely cited as evidence the Fed is unlikely to begin tapering in December.
Janet Yellen's confirmation hearing is this Thursday. Her view on the strength of the economy--and when the Fed is likely to begin tapering, and then begin raising rates--will be a focus of the hearings (hopefully).
3) Who says activist investors don't get companies to change? Say what you want about the aggressive tactics of Carl Icahn, but they do have an impact. Icahn holds a 5.6 percent stake in oil driller Transocean; today the company announced it was raising its annual dividend from $2.24 to $3.00, a better than 30 percent increase. The board will be reduced from 14 to 11 directors and they will elect two Icahn-backed directors. It already sports a 4.2 percent dividend yield.
—By CNBC's Bob Pisani