The Rally Apologista’s Handbook
Josh Brown penned this amusing and accurate takedown on the anti-Rally squad.
“But the volume is lower than in previous years”
You say: Its time to forget about the volumes we saw during 2006, 2007, 2008. Hedge funds and prop traders will never have access again to the amount of margin that was once freely offered by prime brokerages and investment banks.
“But the volume has declined since the summer/ early fall”
You say: Sure, because no one is in the mood to risk the percentage gains they have on the books until the calendar turns to 2010. How refreshing it is to see people acting responsibly with Other Peoples Money, even if they’re abstaining from trading for selfish reasons (performance bonuses locked in).
“But taxes must be raised next year/ tax incentives will run out”
You say: The removal of fiscal policy may be likely, but the bears argue that incentives like “cash for clunkers” haven’t helped anyway.
“But the worst stocks like AIG and Fannie Mae seem to be leading the markets”
You say: I don’t know if they are leading, although they have made some huge gains. But you can’t have this discussion without mentioning the fact that they were the most crushed stocks going into the rally’s start, some of these names were down 95% from their peaks and probably would’ve gone to zero absent the government’s (ludicrous and illegal) intervention.
“But insiders are still selling, they are closer to the companies’ prospects than anyone”
You say: I have never seen a shred of concrete evidence that shows me that corporate insiders as a group have any edge whatsoever in terms of the timing of their stock buys and sells.
“But interest rates must be raised”
You say: True, and this will mean two things…one, that the markets and economy are no longer on the brink and secondly, just imagine the effect on stocks when all that money in the bond market (from a a total of $67 trillion-ish) comes rushing out, looking for a home.
“But Commercial Real Estate is the Next Shoe to Drop!”
You say: It will be ugly for the most leveraged among us, as usual, but there is also a tremendous amount of cash lurking out there, waiting to strike.
“But unemployment will remain elevated for quite some time to come”
You say: Congratulations on inventing a time machine that has allowed you to predict with utter certainty that there will not be any new companies/ industries coming out of the woodwork to take advantage of our high capacity labor pool.
“But Healthcare/ Energy Prices/ Aging Workforce will bankrupt the nation”
You say: As we speak, there are brilliant and clever people working on ideas and business models to address all of these issues and others. Human beings have always adapted to difficult circumstances, and American human beings happen to be better at this than any collective in world history.
Fun stuff!
>
Full version here:
The Rally Apologista’s Handbook
Joshua M Brown
The Reformed Broker, December 7th, 2009
http://thereformedbroker.com/2009/12/07/the-rally-apologistas-handbook/
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December 7th, 2009 at 5:58 pm
Barry, today you’ve portrayed a comment on insider activity as an “accurate take down”, specifically: “I have never seen a shred of concrete evidence that shows me that corporate insiders as a group have any edge whatsoever in terms of the timing of their stock buys and sells.”
Yet two weeks ago you posted an account of insider activity which as you summed it up, as a “busted myth” of the bailout era ( http://www.ritholtz.com/blog/2009/11/bear-stearns-lehman-execs-kept-billions/ ): Everyone knows that senior execs at Bear Stearns and Lehman Brothers were paid largely in stock, and that they lost most of their wealth when the companies collapsed, right? …. Turns out, not so much: “Executives Kept Wealth as Firms Failed …. Most of the executives sold far more shares during that period than the number they held when their companies hit bottom.”
Now re-read that first, more recent, comment again and witness how it collapses into tiny little pieces of pure bunk.
December 7th, 2009 at 5:58 pm
What’s your response to the fact that FASB has gotten rid of mark-to-market and the banks are not forced to realize their losses until the end of the loans?
December 7th, 2009 at 6:06 pm
^ note: I thought I saw a direct quote “busted myth”, though perhaps it was elsewhere. in any regard, it serves fairly well to paraphrase your summation on the matter, even if it wasn’t your exact words.
December 7th, 2009 at 6:11 pm
“But Healthcare/ Energy Prices/ Aging Workforce will bankrupt the nation”
The answer: It’s already bankrupt, if solvency is assets greater than liabilities.
December 7th, 2009 at 6:16 pm
awesome-
here is one they may have forgotten-
should i invest now- even after the big rally: you say-
does a cow shit in a pasture?
when they say- but . ..but
you say-
does Raggedy Ann have cotton boobies?
by then they’ll be writing a check- i’m sure of it
December 7th, 2009 at 6:35 pm
[...] Ritholtz links to a nice piece making the argument that the equity rally is for real. It’s a nice counterweight to constant [...]
December 7th, 2009 at 6:35 pm
Mmmmmm cotton boobies………. So soft a pillowy…….
Now who do I make the check out to?
December 7th, 2009 at 7:09 pm
He’s got some good points, but one that he left out was consumer’s propensity to spend. It’s been heading south for nine months straight: http://www.calculatedriskblog.com/2009/12/consumer-credit-declines-for-9th.html
December 7th, 2009 at 7:20 pm
That Mr. Yousay guy is full of crap.
December 7th, 2009 at 7:23 pm
doc i think your pointing out that the consumer has learned the same lesson from the GD. again. plus they make less that before and don’t care to use credit to make it up any more
December 7th, 2009 at 7:33 pm
So…
I can’t be the only one who sees the irony/cognitive dissonance behind the premise that a retail broker is giving “objective” “stay long” investment advice.
/former retail broker
//100% Vanguard in non-trading accounts (IOW all accounts except my trading account)
///Still 50/50 stocks/cash, but getting progressively more liquid
December 7th, 2009 at 7:51 pm
Hey Byno,
believe me, the last thing im doing is giving any kind of advice, especially of the long-only-at-all-times variety.
feel free to check out the whole piece, thx
jb
December 7th, 2009 at 7:55 pm
Where’s the wailing about how Obama’s a socialist?
You Say: Do you know what the word means? The TARP payoffs are UN-socializing the businesses Bush socialized and left to be socialized. …Barrack Obama, the greatest de-nationalizer in America’s history. Our Commander-in-Chief has saved American capitalism. Four more years… Four more years…
P.S. Doc, It’s not consumers propensity to spend… it’s credit cards. People are moving to debit cards.
December 7th, 2009 at 8:10 pm
I say: Dude is full of shit.
The market can create, react to, and perpetuate its own bullshit. We have social problems brewing that are not being addressed by the market. Funny how that kind of stuff trumps everything else when it reaches critical mass.
December 7th, 2009 at 8:21 pm
Started better than it ended. Faith in progress and brilliant and clever minds to find a way? Not so much.
December 7th, 2009 at 8:45 pm
@JB — Your article sounds like one of them thar Sales Training Course handouts (“If the prospect says this, you answer…”). Most excellent, dude.
December 7th, 2009 at 8:45 pm
Chucho Valdes can teach all one needs to know about the markets.
http://www.youtube.com/watch?v=9VCME9tp9Es
Lots of notes, difficult to anticipate direction, rhythm boils the blood, and just when you get a sense of where the song is heading, ‘boon boon’, the music stops.
Which brings you to: Lágrimas negras
http://www.youtube.com/watch?v=Zymg0tid-V8&feature=related
Haha, best to build up treasure in heaven cuz you won’t find it here…
December 7th, 2009 at 8:47 pm
TZ-
Re the story about a lawsuit related to SAC and the gender reassignment angle, I’ve got one thing to say:
Yikes.
December 7th, 2009 at 9:05 pm
MRegan@8:45-
…you are into this?
totally awesome,
never heard of the dude before – Chucho Valdes, WOW, sweeeeet.
December 7th, 2009 at 9:08 pm
…treasure in heaven or not,
Lágrimas negras
…is nowhere as interesting…
December 7th, 2009 at 9:38 pm
“As we speak, there are brilliant and clever people working on ideas and business models to address all of these issues and others.” Right….care to elaborate?
@ Doc & willid3: Consumer Credit (Oct) Reading: -$3.5B Expected: -$9.3B Previous: -$8.8B A better than expected $6B. So, someone is opening the spigot.
December 7th, 2009 at 9:42 pm
@MRegan: No kidding, huh? The tale there is in the psychological pressure the boss put on. But damn, I’d LIKE to think I’d tell the wife I was leaving the job after the subtly feminine dress code got added. Damn.
December 7th, 2009 at 9:44 pm
This is just genius….
“But What About the Public/Private Debt per Person that has exploded over the last 25 years that cannot be paid for?”
You Say: Errrrr…….Amazon is en fuego baby! Gotta getchya’ some of that action!
December 7th, 2009 at 10:16 pm
TZ-
It is always a pas a deux.
As for Lágrimas Negras (Black tears), just old timey son cubano that fit my music riff on the markets
“Tú me quieres dejar
yo no quiero sufirir
contigo me voy gitana
aunque me cueste morir”
You want to leave me/I don’t want to suffer/With you I’ll go, gypsy woman/even though it costs me my life (savings! jajajajaja!)
I saw Chucho Valdes in Austin Tx back in the summer of 1999, due to the generosity of a fine guy. Chucho was de cuco that night- I’m still grateful and amazed.
December 7th, 2009 at 10:18 pm
This is way off subject but I just came across it. Seems the SSA is somewhere between bargaining and acceptance. Read the green section of page 1. Wish they would have sent me a forewarning like this…
http://www.ssa.gov/newsletter/Statement%20Insert%2025+.pdf
December 7th, 2009 at 10:39 pm
@MRegan:
My (creeped out) thoughts exactly.
Unfortunately for SAC and the manager, the “he had real purty lips and loved to use them” defense is probably not a winner.
December 7th, 2009 at 10:46 pm
@TZ, MRegan — my first thought when I heard about this SAC stuff was, “if this is what you have to do to trade, what do you have to do over at GS for those enormous bonuese”?
(and for those of you who already saw me make the same comment on another blog, I can only semi-quote James Henson — when asked how they picked jokes for the Muppets, he said if a joke was bad, they used it. If it was reallybad, they used it multiple times.
December 7th, 2009 at 11:00 pm
bergsten….Jim Henson was a friggin’ genius.
The SAC capital proves the adage that truth is stranger than fiction. Nobody could have made that stuff up…
December 8th, 2009 at 12:12 am
The whole whose right? the bulls or the bears? argument has gotten REALLY old. It’s like the endless BS and posturing by fans before the Super Bowl or World Series. I happen to think that there is a predominance of evidence on the pessimism side–but I don’t trade that way. As with sports, you will win or lose money based on the bet you make, not whether your team wins or loses.
December 8th, 2009 at 12:51 am
The article still seems to be boiling down to cash on the sidelines as the savior of the markets. Based on past experience I’m not sure that cash is going to go back into the markets when it has so many other places it is needed. And this:
How refreshing it is to see people acting responsibly with Other Peoples Money,
uhhhh……no. Not so much. Now you’re dreaming in technicolor. Why would they need to be responsible with OPM when their greatest benefit is to cash in on short term gain that creates a big time bonus and no legal consequence?They haven’t fixed things and the people playing with OPM do not fear their customers legally or otherwise (except maybe that one clown in the UK who had the windows on his Mercedes and McMansion smashed)
December 8th, 2009 at 4:11 am
Along the lines of what the first reply said:
I also throw the bullshit flag on this statement:
“I have never seen a shred of concrete evidence that shows me that corporate insiders as a group have any edge whatsoever in terms of the timing of their stock buys and sells.”
Oh really now… not one shred? How about when Angelo Mozillo accelerated sales of the Countrywide shares in his “blind trust”? Does that sound like the act of a clueless insider?
December 8th, 2009 at 6:36 am
Face it, if you bought the low, you’re a savy pro, and and have a better plan than almost all. You have let you’re winners run, and will continue to do so. Thus, there just is not alot of stock for sale, period. You’re goal is too sell at the top, or before some major 30-40% correction, and for the latter to happen, one would guess you have you’re tells for such and event. And the band plays on.
December 8th, 2009 at 7:04 am
Believe an optimist like this has lucked into some good buys in March and good on ‘im. But he may just a bit cockeyed or gay.
Chicken Little and Polly Anna are in a duel right now, and the outcome is hardly certain, a gross understatement.
On some days the ‘facts’ say one thing and on another they say something diametrically opposite. But the creators of those facts, those few members of The Tribe don’t give a damn about anything that does not include their own self-aggrandizement.
For the believers in BB and the Dominoes, it has been a bonanza to assume that they will inflate our way to equilibrium and maybe even prosperity. The line in Vegas is not so sanguine. For those in The Tribe who have been tipped or created the tips in the first place —The FED, other worldwide central banks, the Treasury and the primary dealers —they have formed a real conspiracy to exploit the the global financial system by socializing (how nice that lefty word sounds to the ear) all the losses of what used to be ‘risk takers’ and are now insured (by a magnificent, magical printing press only they have access to) not only against any losses but assured gains no matter what the outcome, and making historic record-breaking profits for select members of The Tribe from which to pay themselves those newly minted dollars in the trillions. Who wouldn’t be envious to be one of them if only for one year.
The cold-hot anger among us who know quite a lot about what is really going on (and not what the MSM is serving up to keep the great unwashed from revolting or simply resign in despair) can find no outlet but the thieves on Wall Street who run our government for only their benefit feel this groundswell of despisement as they are now packing heat to defend themselves against possible assassination by lone gunmen who have Oswald-like tendencies.
Be hopeful and glass- full sir, but as the economy continues its downward, jobless spiral, as many of the forecasts like the coming crash of CRE, mortgage ARM re-sets, credit card purchase declines, and those nasty black swans descend from the skies, one wonders how long it will take for even the most starry-eyed among us to begin to feel a sense of impending doom or ennui, gradually becoming convinced that our greatest days are far behind us due to a few dozen Goldman Sucks, Countrywides, Hank Paulsons, Kashkaris, Fulds, O’neals, Weinbergs, Madoffs, Stanfords, and employees of the Street past, present and future who have, like a vampire squid, wrapped their poisonous tentacles around the face of the globe and sucked out all the blood.
December 8th, 2009 at 7:36 am
The real problem is that the negatives the author ridicules are REAL negaitves that have not been fixed. The can has just been kicked down the road out of the way of the pigs so they can get to the Federal Government’s trough.
Some day, no one will fill it and we’ll hear lots of squeals as they are slaughtered instead of fed.
December 8th, 2009 at 7:40 am
Great stuff. Make sure that Short sellers are not reading it since it would make them to cry.
December 8th, 2009 at 8:05 am
My question is:
now that the dollar is rising (so says the meme so must be true) will we get to see the disconnect between wall street and main street happiness in full reverse view? For the last x months the market has gone nuts and wall street has profited handsomely as main street held on with white knuckles and chewed nails; will main street be rewarded by the site of wall street profits falling as our economy turns the corner to ‘breathing normally again’ status? I’m sure there are more than a few who would like to see a return to stability for main street seemingly correlated to losses for wall street as they struggle to cover positions. After all, the dollar gained little bit last week and oil dropped like a stone so imagine if the dollar gained 20-30% over the next 16 months? How would that play politically?
My 2 cents is the economy will improve faster than thought if only because a lot of players have been evaporated by this recession, so those still standing want to capture that market share as soon as possible. There is starting to be good reason to think about competition going forward rather than pure survival for a lot of small businesses, and if we reach a point where business start to think it’s time to close the gaps left behind things could pop dramatically. Not saying they will but I see the potential, from down here at street level…
Have a nice one!
anyway, any ideas?
December 8th, 2009 at 9:30 am
[...] A takedown of the anti-rally crowd (short): http://www.ritholtz.com/blog/2009/12/the-rally-apologistas-handbook/ Headlines The Fed was at it again. ‘It’ [...]
December 8th, 2009 at 9:58 am
[...] bears cite low volume, insider selling and the eventual rate hikes as reasons to tread carefully. (Here are some retorts to those Nervous [...]
December 8th, 2009 at 10:10 am
“Now re-read that first, more recent, comment again and witness how it collapses into tiny little pieces of pure bunk”
I read both and the only thing than seemed to collapse into pure bunk was Tyler K. One example of Lehman insiders harvesting fat profits years before the collapse of their company does not relate much to the ability of timing for “corporate insiders as a group”.