Last week the New York Times released a feature article on how mutual fund investors were “cashing out” of their mutual funds.

Specifically, it talked about how “small investors” investors are cashing out of stock funds and moving into bond funds.

In Striking Shift, Small Investors Flee Stock Market the paper reports:

Investors pulled $19.1 billion from domestic equity funds in May, the largest outflow since the height of the financial crisis in October 2008…

As investors pulled billions out of stocks, they plowed $185.31 billion into bond mutual funds in the first seven months of this year, and total bond fund investments for the year are on track to approach the record set in 2009.

The trend of mutual fund investors selling stocks and buying bonds has been going on for a long time. It’s usually a good sign too because mutual fund investors tend to buy and sell at the worst possible times.

But the “big news” picked up the financial media, and which was only added to by the ongoing strong of disappointing economic reports, only seemed to hide a much more disturbing trend.

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Despite the downturn, they’re absolutely booming.

While most-watched stock markets are flat at best, their stock markets are running up.

Best of all, there are a lot of reasons these runs will continue in the short- and long-term.

It’s getting exciting in some parts of the world. And the emerging economies we’ll look at below are exceptionally bright futures, have stocks that are still rallying (they’re up 17%, 24%, and an impressive 33% so far this year), and a few ideas on how to play them.

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“When masses of people succumb to an idea, they often run off a tangent because of their emotions.”

That’s what the Humphrey Neill wrote in his 50-year-old book, The Art of Contrary Thinking.

It describes perfectly what’s going on today.

Bad news surrounded us for weeks. The summer doldrums have sunk the S&P 500 by 15%. China’s manufacturing activity growth has fallen sharply. “Depression” was making it back into the headlines. Tax hikes looming on the horizon were a very real concern for everyone. It was looking so bad the Fed even signaled it was eyeing kicking off another round of quantitative easing (a.k.a. printing money).

The masses took it all in and were running off on a tangent too. The increase Closed-End Fund (CEF) discounts we looked at last week showed market is really starting to price in a lot of the worst-case scenario.

Since then, the markets have made a sharp turnaround. The “fix” is in. It’s earning fantasy season and companies are posting average earnings. In most cases they’re not as bad as expected. Which means to some - buy, buy, buy.

Right now though with the herd solidly on the euphoria tangent, investors should be asking, “How long will it last?”

The chart below shows the answer may surprise you.

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My favorite indicator is showing yellow and is on the verge of flashing green.

I know, I know…things look very pretty dreary right now.

Just three weeks into the government’s “Recovery Summer” publicity campaign, most economic indicators are falling. Home sales have plummeted. Consumer sentiment is down. And stocks, as a group, are falling daily.

Then tomorrow we’ll likely get another unavoidable reminder of how bad the jobs situation is. Tomorrow’s jobs numbers are expected to come in somewhere between bad and worse. Bloomberg’s survey pegs the estimated for job losses between 200,000 and zero.

There’s almost no good news to report. Fears of a double-dip recession are real and we continue to expect to spend the next couple of years dipping in and out of recessions.

But there are, and will continue to be times, when both bearish is overblown. One of the best market sentiment indicators I know of looks like we’re about to reach one of those times.

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There are few sectors as volatile, risky, yet as potentially lucrative, than initial public offerings (IPOs).

Every time a company turns to the public markets to raise cash, it’s either a boom or bust. Very rarely are they ever just flat.

This week was no exception. The much-hailed Tesla Motors (NASDAQ:TSLA) has been a smashing success so far. The maker of six-figure electric sports cars’ shares opened for trading around $18 and have soared in the past two days to more than $30 per share (a gain of 60%).

Although Tesla has already started giving back some gains, the success of the Tesla IPO just shows the opportunities that exist in the IPO market. And if you play by the right sight of rules, you can do really well in any type of market and limit risk.

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