Mr. Sensitive

October 12, 2012

Stopped Clocks Should Shut Up

Filed under: Uncategorized — lbej @ 13:38

I’ve taken issue with Goldman Sachs’ chief strategist Abby Joseph Cohen before.  She’s a shameless hack lacking the decency even to bother reverse-engineering an argument to justify her cookie-cutter market projections, but she’s hardly alone on Wall Street.  AJC is a perma-bull; she will always declare that the market is headed higher, irrespective of economic context or current stock valuations.  I single her out for her prominence and her disinterested disregard for logic, but what really galls me is something she has in common with all of her ilk: a total lack of accountability.  Abby always predicts a 10-15% annual increase in the S&P 500—always.  During the late 90s bull market, she was right several times; in the decade-plus since the death of the late, great bull, she’s lost the magic touch (but not the salary, and certainly not the hubris).  Do she and Goldman still crow about last-century success?  Of course.  Do they apologize for missing every turn since then?  Of course not.  They just find excuses.  ‘But we couldn’t have foreseen the tech bubble or 9/11 or the housing bubble or the financial crisis!’ they say.  Probably not.  But if you can’t predict any of the events that transform markets and drive the performance of your clients’ investments, how can you presume to predict the level of the S&P 500 a year from now?  You don’t really think you can, of course.  But you’re a shameless hack, so you don’t care.

In the markets, timing is everything, and perma-bears like Marc Faber and Nouriel Roubini are no more accountable for their lack of it than Abby and the bulls.  If you said that the Nasdaq was wildly overvalued in 1998, you’d have been absolutely right.  But if you were a fund manager and you got out of stocks then, you’d have missed 2000 points of upside and you’d have been out of a job.  If you shorted that overvalued market, you’d have been out on the street.  Make the observation in 1998, sure; make an investment strategy call on it and you cost your clients big-time.  Same thing for 1999.  2000 was the year to short the Nasdaq, but if you listened to the perma-bears (growling loudly since the Netscape IPO in 1996) you wouldn’t have had any capital left to take advantage.

CNBC has been leaning perma-bear lately; I’m sure this isn’t a clumsy attempt to radicalize viewers and convince them that the Obama bull market is a mirage.  That would be unprofessional, and the network of Larry Kudlow, Jack Welch and Rick Santelli would never compromise its credibility that way…if it had any credibility.  The Marc Fabers of the world can’t believe the sun still has the temerity to rise every morning in spite of their brilliant arguments on behalf of immediate and eternal darkness.  Like Abby Cohen and the other stopped-clocks of Wall Street, they’re right every so often.  But I have to ask: is your goal to give your clients actionable investment advice, or do you just want to gripe?  Yes, the world is going to end.  In four billion years or so the sun will become a red giant and incinerate the Earth.  So Marc and Nouriel (and Bill Gross) are right.  They’re also completely useless when it comes to making decisions about investing.  I used to think that was the point that was the point of investment advice, but after all, I’m not famous so I must not know anything.

I noticed recently that the prominent perma-bulls and perma-bears never debate their counterparts on the air; in fact, they don’t often debate anyone.  They appear, they prognosticate, and they disappear.  They’re like Punxsutawney Phil that way, only less accurate.

Wait…could it be…

It’s possible.  If Abby is conveniently out of the office next Groundhog Day, I think we’ll have the answer.


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