RIAs say there's too little to show for the government's much-touted bailout. Independent RIAs' confidence in the U.S. economy and stock market hit a record low this month, according to Advisorbenchmarking, which has been gauging advisor sentiment since early 2004 via its Advisor Confidence Index (ACI).

"We have now clearly passed any opportunity to contain the crisis to mortgages," says Bill Ramsay of Raleigh, N.C.-based Financial Symmetry, one of the advisors surveyed by Advisorbenchmarking this month. "The banking system now requires global treasuries to put up actual equity capital [and U.S. Treasury secretary Henry Paulson] has been 'big talk, little action' -- the market either doesn't believe he has a bazooka, or thinks he never actually intended to use it."

Smashed

Kenneth Landgraf of Austin, Texas-based Kenjol Capital Management also takes a dour view of the crisis. "Our banking system is being nationalized," he says in reference to the Federal Reserve's and U.S. government's unprecedented intervention in private-sector finance in recent weeks. "Investor confidence and business confidence has been smashed."

The ACI dropped 14% to 79.07 in October from 92.22 in September. |image1|Based on a monthly survey of independent investment advisors, the gauge goes from a "very negative" 33.33 to a "very positive" 166.67. Its mid point, 100, represents a neutral outlook on the stock market and the economy. The index reached an all-time high of 121.41 in December 2005. Before this month, its lowest level was a reading of 86.27 in July 2008.

Despite sharp drops in the economic components of the ACI, stock-market outlook was fairly bullish -- despite the S&P 500, a fair proxy for U.S. stock-market performance, being down about 23% for the month to date -- despite a furious 11% rally yesterday.

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Or perhaps the favorable view on the market was colored by this drop. ACI-survey respondent James Dailey of Harrisburg, Pa.-based TEAM Financial Managers sees tactical gains born of volatility in store for savvy market participants.

"While others are now obsessed with return of capital, we are beginning to get more aggressive and are considering the opportunities being created," says Dailey. "The economy is likely to remain very poor for an extended period, but market volatility promises to provide significant opportunities for those flexible enough to capitalize."

The ACI wasn't the only confidence gauge to hit an all-time low in October. |image3|The Conference Board's Consumer Confidence Index (CCI) took a notable plunge this month, falling to 38.0 from 61.1 in September.

"The impact of the financial crisis over the last several weeks has clearly taken a toll on consumers' confidence," says Lynn Franco, director of the Conference Board's Consumer Research Center. "The [23.4-point] decline in the Index is the third largest in the history of the series, and the lowest reading on record."

Advisorbenchmarking is a subsidiary of Rydex Investments.-FWR

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