Follow the Smart Money: How the Pros Are Trading Right Now

May 8, 2015

No matter what profession you’re in, no matter what sport or hobby is important to you, chances are good you keep track of what the top professionals are up to. More often than not, they’re the smartest ones in the room. They’re the innovators, the thought leaders, and it pays to keep up with their decisions, behavior and opinions.

This is especially true in investing.

Anyone can give you tips on how to get ahead in the market. Maybe you’ve even dispensed some sage advice to friends and family yourself over the years. No offense to you, your cousin or your neighbor, but before making any trading decisions, it’s usually constructive to first figure out where the smart money is headed.

But where do you go for such data? A good place to start is the bull/bear ratio.

Since 1987, Investors Intelligence has released such an indicator on a weekly basis that tracks the market sentiment of professional traders. High readings indicate bearishness; low readings, bullishness.

Currently, the ratio’s 52-week moving average stands at a record high of 3.5.

For the past decade and a half, this indicator has been more-or-less accurate at following the peaks and valleys of the S&P 500 Index. When the index plunged dramatically in 2008-2009 with the rest of the market, pro investors, motivated by cheap stocks and the huge potential for growth, became bullish.

The reverse is also true.  The bull run we’re now in is six years old—one of the longest in U.S. history—and domestic equities are at record highs. What’s helped push the market higher this cycle are low interest rates and billions in dividends. For the first time last year, U.S. companies gave back $1 trillion to investors in stock buybacks and dividends, and even more is expected this year.

As a result, some top traders seem to be anticipating the next shoe to drop.

So what does this mean? Of course, there’s no way to predict what will happen in the future with full certainty.

Having said that, it might be time to rebalance your portfolio by taking some profits from the best-performing assets and reallocating them into assets that are out of favor right now—or better yet, into a product that has a time-tested history of no drama. Research has shown that a systematic approach to asset allocation with regular rebalancing might lower your risk and enhance your returns.

For 20 consecutive years, our Near-Term Tax Free Fund (NEARX), which invests in short-term municipal bonds, has delivered positive total returns in both weak and strong economic climates, no matter if the pros are bearish or bullish.

The fund holds four stars overall from Morningstar, among 179 Municipal National Short-Term funds as of 3/31/2015, based on risk-adjusted return.

Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.

Past performance does not guarantee future results.

Total Annualized Returns as of 3/31/2015:





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The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.

There is no guarantee that the issuers of any securities will declare dividends in the future or that, if declared, will remain at current levels or increase over time.

All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor.

Frank Holmes is the CEO and Chief Investment Officer of U.S. Global Investors. Mr. Holmes purchased a controlling interest in U.S. Global Investors in 1989 and became the firm’s chief investment officer in 1999. Under his guidance, the company’s funds have received numerous awards and honors including more than two dozen Lipper Fund Awards and certificates. In 2006, Mr. Holmes was selected mining fund manager of the year by the Mining Journal. He is also the co-author of “The Goldwatcher: Demystifying Gold Investing.” Mr. Holmes is engaged in a number of international philanthropies. He is a member of the President’s Circle and on the investment committee of the International Crisis Group, which works to resolve conflict around the world. He is also an advisor to the William J. Clinton Foundation on sustainable development in countries with resource-based economies. Mr. Holmes is a native of Toronto and is a graduate of the University of Western Ontario with a bachelor’s degree in economics. He is a former president and chairman of the Toronto Society of the Investment Dealers Association. Mr. Holmes is a much-sought-after keynote speaker at national and international investment conferences. He is also a regular commentator on the financial television networks CNBC, Bloomberg and Fox Business, and has been profiled by Fortune, Barron’s, The Financial Times and other publications.  Visit the U.S. Global Investors website at

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