Invictus is a bulge bracket asset manager with $100+ million AUM. He has no patience for money losers, hacks, partisans pretending to be financial analysts . . .  this is the first in a series of critical looks at analysts, media, economists, financial TV. Feel free to share any thoughts in comments.

Here’s Invictus:

~~~

I’ve been reviewing some older columns that stood out to me as giving especially bad advice during  the period near the market peak. One in particular stands out as especially bad — poorly reasoned, not well thought out, full of weak analysis. It was amongst the worst of the money losing financial advice Smart Money has ever run. If I find more examples as bad as this one I am going to suggest the magazine change its name to Dumb Money.

Let’s set this one up first: This weekend, in Barron’s Alan Abelson devoted part of his column to the travails of Citibank:

“THE CITI NEVER SLEEPS. AND WE couldn’t, either, if we were Citigroup, given the way things have been going for the bank and its shareholders. The bank is wallowing in the red, and the stock, which sold at 56 and change in 2007, is now less than 3.50.

Moreover, among its other woes, it’s in a legal battle with Abu Dhabi, whose sovereign wealth fund is trying to squirm out of a deal closed back in November ’07 that obligates it to buy $7.5 billion of Citi stock at $31.83 a share come March.”

It seems like only yesterday that Don Luskin, a top Ideological Hack Hall of Famer, told us the 11 Reasons to Buy Now — this was in November 2007, a month AFTER the top, that Abu Dhabi’s investment in Citi was proof that Citigroup and the market were both cheap:

“ADIA’s investment in Citi means that stocks have gotten very, very cheap. Mega-investors like that only step in with $7 billion when they are getting a deep bargain.”

Or not.

The S&P was in the 1400′s at the time, Citi in the mid-30′s or so.  I’ve chronicled Luskin from time to time, and put together an incomplete Greatest Hits over a year ago.

It’s not just his pompous, arrogant, know-it-all attitude that is annoying about Mr. Luskin. Rather, its that all of his commentary seems to be that of a broken clock. He has been bullish as long as he has been on TV. The only time I have seen him bearish was yhis one exception: On March 6, 2009, he finally capitulated his bullish stance. Of course, this was RIGHT AT GENERATIONAL MARKET LOWS. Luskin wrote in Even Worse Than the Great Depression that:

“We can’t blame President Obama for the mess he inherited. But we can definitely blame him for making it worse. Stocks are off 28.4% since his election, 15.2% since his inauguration, and 17.2% since his so-called “stimulus” bill was enacted. To say the very least, whatever he’s doing, it ain’t working.”

And there is the partisan hackery he is so famous for. Since that politically inspired post, the S&P has rallied 63%. No word from DL as to what this rally means.

I hold no animus toward those who get it wrong in finance/economics. We all do. It goes with the territory. I do hold a fair amount of ill will toward those who distort facts, deliberately mislead others, or otherwise dissemble to support an ideological position. (As another example, see this 2008 foolishness about Housing  data).

Refusing to acknowledge one’s mistakes when presented with incontrovertible evidence is similarly a no-no in my book. And these folks need to be called out on their nonsense. It is both intellectually dishonest and counter productive.

Smart Money readers should learn to ignore his money losing advice . . .

>

Source:
11 Reasons to Buy Now
Donald Luskin
Smart Money, November 30, 2007
http://www.smartmoney.com/investing/stocks/11-reasons-to-buy-now-22207/

Category: Analysts, Media, Really, really bad calls, Research

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

40 Responses to “Luskin: Buy Stocks, Buy Citi (11/07) Sell Stocks (3/09)”

  1. Invictus says:

    In July 2008, Mr. Luskin wrote a column titled Housing, Job Data Signal Recovery, Not Recession.

    In that column, he wrote:

    “I haven’t seen a single media story that reported the truth: that the median price of an existing home rose in June. It went up. It was higher.

    Let me be perfectly clear. The median existing home price was higher in June than it was in May, rising to $215,100 from $208,600. Oh, and while we’re at it, the price was higher in May than it was in April. And guess what: It was higher in April than it was in March. And hey, while we’re at it, it was higher in March than it was in February.”

    There’s a reason the media didn’t report what Mr. Luskin wanted it to report. In its releases, the National Association of Reators (NAR), from which Mr. Luskin got his information, states:

    “The only valid comparisons for median prices are with the same period a year earlier due to the seasonality in buying patterns. Month-to-month comparisons do not compensate for seasonal changes, especially for the timing of family buying patterns.”

    Anyone even remotely familiar with seasonal influences — as one hopes Mr. Luskin should be — would never, ever make such a foolish rookie mistake. Which leads me to the conclusion that it was not an error, but actually a deliberate attempt to distort facts.

  2. Mannwich says:

    Is this clown still “managing money”? Good grief. Did he ever admit he was wrong?

    I think that’s the new mantra in this country – never admit wrongdoing and that means it didn’t happen. Extend & pretend writ large.

  3. super_trooper says:

    “the S&P has rallied 63%. No word from DL as to what this rally means.”
    Probably that no one has done batter than Obama. He’s doing everything right……..
    until S&P goes down…..

  4. Marcus Aurelius says:

    Incompetents like this hold positions of power and influence at all levels of business and government. It’s the result of cronyism and Parkinson’s Law (TPTB want to multiply subordinates, not rivals), and one of the primary reasons we’re destined for decline.

  5. The Worst Risks of the Credit Crisis Averted (March 21, 2008)
    http://www.smartmoney.com/investing/stocks/The-Worst-Risks-of-the-Credit-Crisis-Averted-22755/

    His track record is delightful . . .

  6. GetALife says:

    MA: How is Luskin holding a position of power and influence? What is your understanding of what he does?

    Invictus: what is a “bulge bracket asset manager”???

  7. ashpelham2 says:

    Every single day, I see new evidence of the brain drain in America. The smartest minds realize that even they get it wrong sometimes. They keep those times when they are wrong to themselves, and sell to us the times they are right.

    It’s not their fault. They’ve simply figured out how to do it and make a living from it. If you have to hold a job that pays your bills, isn’t that what each of us is doing?

  8. Chris says:

    Financial advicers bashing is good fun, but well, I know nobody who really bases his/her financail decisions on anything any advicer (good or bad) says. However, after the money is lost it is always the fault of bad advicers.

    ~~~
    BR: I believe that in the 1990s, people listened to TV talking heads more than should have — and they probably still do.

    The same people are still on the air giving bad advice.

  9. “…isn’t that what each of us is doing?”

    ash,

    if you mean ‘singing lies ‘for our Supper’ ‘ , I don’t think so..

    of course, there are examples that prove your point — Global Warming/Climate Change ( aka GHG-induced AGW ), and others..

    also, further http://www.softpanorama.org/Skeptics/lysenkoism.shtml#Lysenkoism%20and%20high-demand%20cults

    but, again, if it were so rife in our system, it would have, already, failed, earlier and/or much worse than it has..

  10. call me ahab says:

    “I see new evidence of the brain drain in America”

    well . . .in Luskins case . . .that wouldn’t apply

  11. mguerreiro says:

    Hey, this is great, I am going to start following this guy and do the exact opposite. If he went short at the exact bottom, he must be great for a “contrarian indicator”

  12. jack says:

    Barry, i am a financial advisor with about $150 aum. i also agree that people still watch too much tv in regards to financial advice. i have people coming in every day who say ‘i saw this on cnbc, what do you think?’.

    My stock answer is always ‘don’t watch financial tv, at least not to get your best information’. I will then tell them that the best place to get advice is on the internet, including your blog. I remember reading that article from luskin in 3/08 when i was searching for some ideas as to how bad the credit crisis was. I didn’t use it as my only reference, but it did play on my decision to not overreact to what was happening in the spring of 2008. it was about this time that i started visiting here daily. I wished that i had started earlier.

  13. Moss says:

    Lets not forget Kudlow.. and the ‘ Obama bear market’, the Bush Boom book endorsements .

    The term ideological hack is well deserved for Kudlow as well along with the other members of his gang including Jerry Bowyer and Luskin. Other terms of endearment from the ex-coke addict and Supply side addict include ‘Tree Huggers’ and other derogatory remakes regarding people with long hair.

  14. Mannwich says:

    What’s interesting (or maybe not) about the likes of Luskin and Bowyer is that if Bush or a Republican in charge of things now, they’d attribute this so-called “recovery” to their genius (and even write books about it that sell for a penny), but since it’s a Dem in charge, we don’t hear a peep about that. The minute this paper mache market and economy fall apart again, it will be all the Dems fault. Wait for it. The political blinders these guys put on (they do it on the left too) is truly a thing of anti-beauty to watch.

  15. Moss says:

    While I do not consider myself ‘liberal’ I like to read many different things and get many different perspectives. For those so inclined this link is priceless:

    http://www.anonymousliberal.com/2008/10/bush-boom-revisited.html

  16. call me ahab says:

    “economy fall apart again,”

    manny- I wouldn’t say the economy has recovered- regardless of what all the GDP followers say- GDP increased after 1933- but it didn’t mean we were out of the depression-

    that there are automatic stabilizers in the economy such as unemployment compensation and food stamps- may take some of the sting out of beign jobless- doesn’t negate that there will be people unemployed for a long time-

    stock market is only a show and doesn’t reflect the underlying fundamentals- if it ever did

  17. Mannwich says:

    @ahab: I would agree, but I’m just saying THEIR meme is that we’re “in recovery”, so when it’s apparent that we’re not (they’ll say it was Obama and the Dems who pushed us into a double dip), they’ll blame O man and the Dems. Keep in mind that I’m not defending O man or the Dems but I’m just pointing out the continual intellectually dishonesty of their arguments.

  18. Mannwich says:

    @Moss: That is priceless. This is why I really love the internet and technology. Everything is now a record for ALL to see, and it often reveals just how clotheless our so-called “emperors” really are much of the time.

    I used to get into some regular email battles with Mr. Bowyer back in the day. It was really pretty easy to get him to write some scathing missive (I should have saved some of the emails) in response to my needling but, alas, he stopped responding over time, so quit that recreational activity.

  19. call me ahab says:

    manny-

    sorry dude- guess I missed your point- I was only commenting on “the economy will fall apart again” which presupposes that it is now “back together”

    all the political posturing- well you know how that goes- the opponent was lucky that things improved in spite of their actions or the opponent is responsible that things didn’t improve because of their actions-

    no getting around that dynamic

  20. Moss says:

    @mannwich
    Everything is now a record for ALL to see,

    It is a record for anyone who chooses to see.

  21. Joseph Martinez says:

    For TV news I have to go with Bloomberg. CNBC does what it does and the only control I have over that is to turn them off.

  22. Mannwich says:

    I barely even bother to watch TV anymore, except for my circus diversions that are sports, movies and HBO. No more CNBC OR Bloomie or any so-called television “news” for this Mannwich. Best decision I’ve made all year.

  23. Mannwich says:

    On another note, I’m not sure if Drew Weston has enough “credibility” for the likes of f411, but he has written some political books and is a PHD at Emory University. Am guessing f411 will find SOME reason to totally dismiss him though.

    http://www.huffingtonpost.com/drew-westen/leadership-obama-style-an_b_398813.html

  24. Transor Z says:

    There’s a billboard on the westbound side of the Mass. Pike in central/western Mass. that reads:
    Recessions 101: The Interesting fact about recessions … they end

    http://goodnews.feedables.com/story/3669658/Billboards-Urge-Optimism-During-Recession

    Supposedly some “anonymous East Coast donor” buying billboard space.

    I kind of want to take a grenade launcher and punch a big scorched hole in the middle of it. Is that wrong?

  25. Transor Z says:

    btw, posted that thought at 2:01 pm because I have the nagging sense that the backers of the message are not trying to elevate mankind but diffuse outrage by encouraging people to “think happy thoughts.”

  26. Marcus Aurelius says:

    GetALife:

    he’s powerful and influential enough that the post is about him, and not about you or me.

  27. Mannwich says:

    @TZ: I think you would be right. It’s also to let them know that the recession is all “in their heads” and “their fault”.

  28. call me ahab says:

    why didn’t we see this headline in 2006-

    the interesting thing about “boom times”- they collapse- ALWAYS

    boy that’s a downer- but certainly the truth

    and here’s another-

    the interesting thing about a Depressions- they end- eventually

    I wonder if TZ will see that one soon . . .probably not

  29. RW says:

    Luskin could be an exemplar for the Dunning-Kruger effect but the logic he followed in recommending Citi — buy because a big money buyer is going long at x — is apparently followed by a fair number of people (but what Buffet is buying and all that). It used to make a certain amount of sense to me but I finally decided the motivations, time scale, models, etc were too likely to be different to be genuinely useful and mismatch in purpose could lead to serious misstep.

    That may have had some influence in one of my final but more profitable short sales during the RE implosion. I’d made a big killing shorting the mortgage lender New Century earlier so perhaps I was in a shorting mood but while zeroing in on WCI Communities I was told to think twice about shorting it because Carl Icahn had apparently taken a big long position in the firm.

    I did think twice …and shorted WCI about 89% down before exiting (it eventually went all the way down but, unlike NEW, was taking too long): Have no idea what Icahn was thinking, maybe he wanted a tax write-off, but whatever his purpose it wasn’t the same as mine.

  30. ToNYC says:

    Hey, as Jesse Livermore reminds us, let’s not piss him off or he won’t give us any more advice!
    I tune on CNBC to listen to fools who open their mouths and by doing so remove all doubt. Money is made by thinking for yourself and learning from your own mistakes. Expecting to get “what to do” from talking sense makers only delays your game. Better to do whatever makes the least logic and sense, the crowd will surely wait for history to be sure.

  31. Transor Z says:

    @ manny & ahab:

    Awesome. Fun riff.

    The interesting thing about peasants is that they always have pitchforks. Or glocks.

  32. CTX says:

    hold on a second, this is the Luskin who Kudlow always has on? permabull

  33. Poke646 says:

    Yup…Donald Luskin, Jerry Boyer, Larry Kudlow….the worst track records ever,
    i would add a couple of other standouts that CNBC has on all the time: The banking genius with the tiny round mouth, Dick Bove and the ALWAYS wrong Brian Wesbury.

  34. Poke646 says:

    oh yea, and what about Art Laffer…i’m not sure he’s ever been right about anything he’s ever said on Kudlows show.

  35. CTX says:

    and the other guy from Blackrock- dole- always bullish- the tv network makes you want to vomit- i havent seen Ritholtz on for a while- or has he??

  36. farmera1 says:

    Where’s “Baghdad Bob” when you need him.

    I think a list or award would be appropriate.

    Baghdad Bob’s Top Ten all time prediction professionals:

    1. Kudlow
    2. Laffer
    3. Luskin
    4. Boyer
    5. Bernanke
    6. Greenspan
    7.
    8.
    9.
    10.

    The traveling trophy could be the flying finger of fate, or just a small pile of crap.

  37. RW says:

    “flying finger of fate”

    Make that the “fickle finger of fate” trophy and I’m there.

  38. [...] an inherent bias or wishful thinking comes into play; other times, its partisan ideology getting in the way. And in some instances, a little bit of common  sense goes a long [...]

  39. ben22 says:

    I wish I could find the clip because it was just a few months ago I heard Luskin claim on Kudlow that “we called the bottom to the day for our clients”, apparently in his own mind that article he wrote on 3/6/09 was “calling the bottom”

    He’ll fade during the next wave down, lots of people will, it’s going to come to close to the last one. There are a lot of people that are going to be on the list.

  40. Scott F says:

    Put Real Clear Markets into that camp — they are a bunch of right wing hacks you previously recommended — much closer to Drudge as a link source than Bloomberg/WSJ

    http://www.realclearmarkets.com/