Something doesn’t add up?  Generally speaking, when people put more money into the stock market, it goes up.  When people take money out of the stock market, it goes down.  According to Bank of America, investors are now the most bearish they’ve been since 2008.  In fact, they’re withdrawn $322 billion from the market in the last six months.  That’s not surprising since consumer confidence and consumer sentiment are both substantially down from than their highs last year.  So, who is filling the void?  Who is buying the $322 billion in stock that got sold to take cash out of the market?

The first suspect was foreign investors, since the U.S. market is so much more attractive than the rest of the world.  However, with the dollar so expensive to purchase, our stock market is very, very expensive for them.

Another suspect was that there are fewer investors who are more and more giddy.  The price-earnings ratio measures how much investors will pay for one dollar of earnings.  It is now a little over 18 times, which is high but not outrageously.  They are not too giddy —  just very bullish.

Another suspect is that stock buybacks have substantially reduced the supply of stocks available to buy, which would drive up the price per share.  However, stock buybacks are running 15% less than last year.

Maybe, there is a disjoint between economics and finance.  The economic data is clearly turning bearish, but two-thirds of the S&P 500 companies reporting this quarter have been surprisingly bullish.

So, who are you going to believe?  Economists or companies?