I was at a book party last week, and I overhear a conversation where someone (literally) is introduced as “the guy who put Jeff Bezos on the cover of Time (December 1999) as the man of the year.”

I immediately butt into the conversation, saying “That cover made me tons of money– thanks!” We then proceed to discuss the magazine cover indicator, and what it means for the markets.

Which leads me to my buddy Paul of Infectious Greed. I think he commits a contrary indicator faux pas (S’okay, We’re Good. America’s Back) when he calls the Newsweek cover “a classically contrarian magazine cover indicator.”

I beg to disagree.

The magazine cover contrary indicator works when it reflects a fairly long lasting, well understood concept that is reaching a climax. By the time the editors of a major non business publication recognizes the well established trend, it is has already peaked. The grand daddy of all of these is BusinessWeek: The Death of Equities — after a 15 year bear market.

Have a look at the June 13 2005 Time Falling Home Price Magazine Cover in which they explain “Why we’re gaga over real estate.” That was as close to the ringing of the real estate bell at the top as you will ever see.

So why isn’t this a contrary indicator after a 75% market rally? Three reasons:

1) It refers to an economic turnaround — not the stock market

2) It does not follow a trend that has been in place for a long time

3) It does not represent a broad societal belief

I suspect some of you disagree; feel free to explain your positions in comments.

>

Here’s the Newsweek cover in question:

Update: Henry Blodget interviews Dan Gross on the Newsweek cover here.

>

Previously:
BusinessWeek: The Death of Equities (August 13th, 1979)
http://www.ritholtz.com/blog/1979/08/the-death-of-equities/

Understanding Contrary Indicators (May 31st, 2008)
http://www.ritholtz.com/blog/2008/05/understanding-contrary-indicators/

Falling Home Price Magazine Cover (August 12th, 2009)
http://www.ritholtz.com/blog/2009/08/falling-home-price-magazine-cover/

Category: Contrary Indicators, Financial Press, Psychology

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.

54 Responses to “Newsweek Cover: Contrary vs. Contrary Indicator ?”

  1. TBP Editor: says:

    If you look at some of Dan Gross’ covers, they have been spot on:

    January ’08 cover — The Road to Recession, arguing that we were heading into recession. (In fact, recession we now know started in Dec. ’07) though the economic world didn’t wake up to it until much later. A leading, not contrary indicator. Mocked on CNBC.

    March ’09 cover — Uncle Sam selling people to start spending now. Essentially arguing that people have to start investing and spending again. A leading, not contrary indicator.

    July ’09 cover — The Recession is Over: Good Lucking Surviving the Recovery. Arguing that GDP had started growing but that the economy faced challenges that would make it seem different than other recoveries. Widely mocked, including by president obama. Again, a leading not contrary indicator.

  2. Transor Z says:

    (1) Except the “broad societal belief” is that the stock market IS an economic indicator… :-)

    (2) Staying with the idea that stock market = economy in this article, here is a direct quote from the Gross piece:

    But the long-term decline of the U.S. economy has been greatly exaggerated. America is coming back stronger, better, and faster than nearly anyone expected—and faster than most of its international rivals. The Dow Jones industrial average, hovering near 11,000, is up 70 percent in the past 13 months, and auto sales in the first quarter were up 16 percent from 2009.

    Note that this follows the July 2009 (another Dan Gross piece)
    http://www.newsweek.com/id/182938 which you addressed here:
    http://www.ritholtz.com/blog/2009/07/magazine-cover-revisted/

    So according to Gross’s time line (but not NBER’s yet!), we are now 9 months into recovery. I don’t know of anyone not on CNBC using the word “remarkable” to describe economic indicators. “Equivocal” is more like it. But the Dow/stock market surge has certainly been “remarkable” by all reports.

    Basically Barry, sorry to say but this piece is shit. For example:

    The current pessimism is part of a historical economic inferiority complex. To hear some critics tell it, things have been going south in this country since the cruel winter in Jamestown, Va., in 1609, when most of the settlers died.

    WTF is that? Historical analysis???

    So I’m going to respectfully disagree an argue that the Gross piece is populist cheerleading equating the Dow with the larger economy and therefore a contrary indicator because the bear market rally is now in its 13th month.

  3. I’m just looking at the cover — and disagreeing with what my friend Paul said — it is not IMO a contrary indicator.

  4. [...] psychology lags at turning points.  (Big Picture, ibid also [...]

  5. The falling home price link is incorrect. Not that it is wrong, it is just that it doesn’t work

    Hey Barry, check this out. This makes for some fun. It is called crack shack or mansion. A short little picture game that you can play. You get to choose whether the picture you are looking at is a crack shack or a Vancouver million dollar mansion. Fun for all ages

    http://www.crackshackormansion.com/

    ~~~

    BR: Oops – fixed!

  6. Jim Bianco says:

    Barry:

    You’re ignoring the current BusinessWeek cover which says the same thing as Newsweek’s cover.

    http://www.businessweek.com/magazine/content/10_16/b4174028669540.htm?chan=magazine+channel_top+stories

    As buisnessweek says:

    Why the Obama Plan Is Working
    Polls say the economy is heading in the wrong direction. Markets say it’s back on track. This time, the markets are right.

    These covers are about justifying the year long stock market rally.

  7. Hey Jim,

    I don’t look at these covers as justifying the market run — they are a narrow focused issue.

    Indeed, the Newsweek cover is an economic look, not a market forecast — and it is in a decide minority of people who think America is back! Its certainly nothing like the Time Housing cover.

    As to the politics of the Business Week Obama cover — consider this post from 2005:

    New Coke vs Time Magazine Marketing Blunders

    I’ve been wondering about how this blunder by Time magazine (the cover issue) will be looked at in the future. Might this be the media equivalent of New Coke? We have already seen quite a few people cancelling their subscriptions to Time Magazine (See Altercation of April 22, 2005). If the boycott of Time Warner gets up a head of steam, this whole affair could end up as the world’s second worst marketing disaster (the Edsel is #3).

    The great irony is in the timing: the exact same week of New Coke celebrating (if that’s the right word) the 20th anniversary of its disastrous introduction, the Time Magazine Coulter cover arrives on Newstands. How serendipitous is it that those two examples of corporate think at its worst share the same anniversary — exactly 2 decades apart? . . . It is the comic timing that’s truly amazing — like some cosmic irony warp which crosses North America every 20 years. This is not only a major blunder on the part of Time Magazine, but on the exact same week as New Coke’s anniversary? What are the odds of that happening?

    Coulter, with no book to promote and having said nothing significant for a while, ended up on the cover. The GOP had held Congress for 11 years; a Republicans had just won re-election to the White House.

    That cover top ticked the GOP for that multi-decade election cycle . . .

    Time will tell if this cover is similar or different . . .

  8. Foreclosure Activity Increases 7 Percent In First Quarter
    News release: “RealtyTrac®, the leading online marketplace for foreclosure properties, today released its U.S. Foreclosure Market Report™ for Q1 2010, which shows that foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 932,234 properties in the first quarter, a 7 percent increase from the previous quarter and a 16 percent increase from the first quarter of 2009. One in every 138 U.S. housing units received a foreclosure filing during the quarter. Foreclosure filings were reported on 367,056 properties in March, an increase of nearly 19 percent from the previous month, an increase of nearly 8 percent from March 2009 and the highest monthly total since RealtyTrac began issuing its report in January 2005.”
    Related postings on financial system
    Topic(s): Knowledge Management, Government Documents
    http://www.bespacific.com
    By Sabrina I. Pacifici
    ~~

    someone should dig out the, appropriate, Carlin quote that goes with the Colors of the Newsweek Cover..

  9. Jim Bianco says:

    and regarding apparent Dan Gross man crush ….

    He joined Newsweek in late 2007. But not before he wrote:

    Pop!: Why Bubbles Are Great For The Economy

    http://www.amazon.com/Pop-Why-Bubbles-Great-Economy/dp/B001G8WB1G

    (used version start at $0.32)

    As Tony Kornheiser might say on PTI … “How has that worked out?”

  10. I hated that title — I suspect it was supposed to be snarky — but the main theme is that the infrastructure bubbles leave behind is of value to the broader economy.

    The finance sector is the one exception to the infrastructure bubble remnant.

    I’m friendly with Dan, but Man-Crush . . . ?

  11. steven kass says:

    2) It does not follow a trend that has been in place for a long time

    I would suggest the cycle of trends got shorter because of the magnitude of the rally. If newsweek want to take a stab at it, they have to make a statement.

  12. pokeman says:

    The rag “Look” was aimed at people who couldn’t read.

    These weekly MSM “news” rags are aimed at people who can’t think.

  13. Clem Stone says:

    Eventually there will be a mag cover that works as a contrary indicator because they come along fairly regularly. But if you kept track of the ones that don’t work you’d find that they greatly outnumber the ones that do. Not something i’d be putting any money behind.

  14. crunched says:

    Stock Market Recovery or Economic Recovery? What’s the difference? Neither is true.

  15. constantnormal says:

    I’m guessing from BR’s tone, that he believes the economy is poised for the next Great Expansion, with the stock market leading the way (his views being subject to momentary changes, as he recognizes new data). [BR: Bad guess]

    And while it is undeniable that we are currently in an upward movement (how could we not be, given the amount of goosing by the Fed), it is also true that our capacity utilization — while increasing — is still lower that it was at the nadir in 4 of the previous 5 recessions. So either we’ve got a HUGE run ahead of us, or an excruciatingly slow (I’m talking decades here) and painful crawl back(! — gotta include the exclamation point, just as Newsweek does), and we’re not quite there just yet, what with housing and employment still tremendous problems. Or both, with a backdrop of foreclosures and unemployment being the “painful” part of the “recovery”.

    Or maybe we’ll continue along the upward path for a while (days/weeks/months/years), and then crash back to reality, just as the economy did in 1937 when the goobermint was finally forced to deal with the accumulation of debt they had built while attempting to goose the economy into motion. Bernanke is determined to not be as faint of heart as his predecessors — a recipe for catastrophe if he is wrong.

    When might the United States of Bananamerica be forced to come to grips with the reality of too much (WAY too much) accumulated debt — in the consumer, corporate, and governmental realms? And what will be the likely result of such a confrontation? Will our Congress suddenly sober up and start making the hard choices necessary for the goobermint to live within its means? How about the public? From the latest consumer spending numbers, it seems that our flirtation with savings is over, and we’re back to ever=more-leveraged life styles. What will it take to turn THAT around, if the past couple of years did not do so?

    Yes, Euroland is in even worser shape than we care, and China has its own bubble trouble, but being the best of a set of nations in extreme difficulty does not mean that “We’re BACK!” — even if the stock market (or the tiny fragment propelled by leverage and ZIRP) is saying that’s so.

    And then we have the potential for Black Swans — thise birds that everyone acknowledges, but asserts that “it can’t happen again, we’ve learned our lesson” … here are just a few:

    1) China real estate bubble implodes — global trade and banking networks severely disrupted
    2) one or more EU nations default, and the EU begins to tear itself apart, with repercussions into the financial and trade global networks
    3) any of several Bananamerican states or major cities defaults
    4) a wave of corporate pension failures, from being too underfunded with too little in the way of revenue/profits to make them good
    5) Fannie Mae/Freddie Mac continue to require increasing amounts of funding, pouring good debts upon bad, and compounding the rate at which our national debt is exploding

    … I could go on for at least another 5, but you get the idea.

    So tell be how it is again that America’s BACK! ???

    We may be on top of the pile of bodies at the bottom of the cliff, but that seems hardly cause for celebration.

    Wake me up wen we have any chance of dealing with foreclosures or employment. I do not believe that there has been a period of economic recovery int eh history of our nation (or any other nation) where a significant expansion was accompanied by a never-ending wave of foreclosures.

    Housing has been, for a very long time, the bedrock of our society and its stability. That bedrock is no longer present.

    http://www.calculatedriskblog.com/2010/04/realtytrac-march-foreclosure-activity.html

  16. scharfy says:

    There’s not one America. There’s at least 10 America’s.

    Whether or not you think America is back depends on where you are in the caste system.

    If you are writing code for Apple or shuffling debt around at B of A, I’m sure the future has never looked brighter.

    If you are trying to make it selling cars in Anytown, Ohio – maybe not so much.

    A public union employee with everything guaranteed probably doesn’t toss and turn too much at night.

    And the poor don’t feel recessions cuz they live in perpetual recession.

    Again – is America back? Depends on your perspective.

  17. wally says:

    The stock market is back, but nothing else is anywhere near ‘back’. Not even close.

    Further, the stock market simply reflects the fact that the price of money – for some people – is now cheap. People make different decisions with cheap money than they do with expensive money. They throw it around a bit.

  18. howard0339 says:

    I once went to a seminar by the then Red Hot Marty Zweig (sic). He stated that his best contrary indicator was the number of positive ads in Barron’s each week.

  19. suetonius says:

    Barry — how did the Bezos cover make you tons of money?

    ~~~

    BR: I was looking for signs that the bull market was peaking. I moved to cash late January 2000, and got short — though not nearly enough — in February.

  20. TakBak04 says:

    Bailout Success Is the Problem
    by David Weidner
    Tuesday, April 13, 2010

    Commentary: The Cost of Propping Up Wall Street Will Be More Than $89 Billion
    The good news is that the bailouts worked. The bad news is the bailouts worked.

    —-
    The new estimate by the Congressional Budget Office puts the loss at less than 1% of gross domestic product and less than 3.2% of GDP the savings and loan crisis cost U.S. taxpayers 20 years ago
    —-

    Who Benefited?

    In the end, it all fits nicely. A banking system we were told by the likes of former Treasury Secretary Henry Paulson that was too important to Main Street to fail, has not only survived, but become more powerful.

    It’s making its recovery not just through a bailout that’s a burden to taxpayers but by squeezing its customers who have fewer choices than ever before.

    And Detroit? The jury is still out on that one, but time will tell if the bailout was just a one-time phenomenon or the start of a cycle we go through every few years.

    So yes, the bailouts have worked. They’ve worked for the beneficiaries: the bankers, the traders, the assembly-line workers and management teams that seem incapable of learning from their mistakes. They’ve worked for two administrations by keeping money and influence flowing to Washington. And they’ve worked for those of us who were able to hang on to our homes and our jobs directly or indirectly through the spending.

    But chances are either you or someone you know isn’t getting the benefits. Maybe they’re in foreclosure or struggling with credit card debt. For them, there could have been some small comfort in knowing the system was held accountable instead of preserved and made more menacing.

    You should get more for $89 billion.

    David Weidner covers Wall Street for MarketWatch.

    http://finance.yahoo.com/banking-budgeting/article/109303/bailout-success-is-the-problem

  21. Transor Z says:

    @swag:
    That Colbert piece is great! “Relax and fatten up.”

    Barry, here is a challenge. For every quote you (and by “you” I mean the slave interns you have helping you with the blog — or your buddy Dan Gross) can come up with dating back to, say, 1885 to present (last 125 years), indicating a sense of an American “economic inferiority complex” I will give you FIVE (5) high quality quotes within 48 hours reflecting American economic imperialism/superiority over the same time period.

    Maximum of 15 high quality quotes, limited time offer to our host/blogger and his authorized agents only. In exchange for which, I propose that you run the following post headline: “Dan Gross is Transor Z’s Bitch.”

    If I don’t deliver, you can suggest the terms of my surrender to yourself or the giant who is Dan Gross.

  22. VennData says:

    As someone who utterly disagrees with your “philosophy” I hereby cancel my subscription to ‘Newsweek.’

    Regards,

    Tea Partier

    P.S. I’ll be adding the subscription money into my already-100% T-bond allocation.

  23. Transor Z says:

    Addendum to 2:28 pm offer post: Acceptance by email to transorzee at yahoo dot com only.

  24. crunched says:

    Does anyone else think the term ‘Recovery’ is getting kind of funny? What exactly is a ‘recovery’ by today’s standards? Could we be in one for another twenty years? Maybe we’re still in a dot.com bubble recovery. Excluding the Fed inflated stock market, is anything really recovering that much? Maybe not getting abysmally worse, but recovering?? No real ‘recovery’ in unemployment and housing. Aren’t they kinda important? What if a recovery really happens? What will we call it?

  25. [...] – Is Newsweek’s cover story touting the economy’s “remarkable turnaround” a contrary indicator, or just plain contrary? [...]

  26. crunched says:

    It’s all about 61.8% on the S & P. The propaganda machine is on high alert.

  27. VennData says:

    Singapore’s economy grows at 32% in the last quarter…

    http://online.wsj.com/article/BT-CO-20100414-703396.html?mod=WSJ_World_MIDDLEHeadlinesAsia

    …and they have universal health care…

    http://en.wikipedia.org/wiki/Healthcare_in_Singapore

    …take that to your next Tea Party, Ladies.

  28. [...] Forget Newsweek — Roubini’s popularity may be a contrary indicator (Ekonomi Türk) • My favorite [...]

  29. bobabouey says:

    Constantnormal says: “And then we have the potential for Black Swans — thise birds that everyone acknowledges, but asserts that “it can’t happen again, we’ve learned our lesson” … here are just a few:”

    Two points:

    1 – The whole point of Black Swans is they are undirected and unpredictable.

    2 – Nassim Taleb also identified as “Black Swans” positive events, including the popularization of the personal computer and the internet.

    The point is therefore to try and build robustness in the event of negative black swans, and also to exploit positive ones as they occur.

    It seems to me to many people have built their portfolios solely to avoid the negative Black Swans, and therefore have not only missed the current recovery – even if technically driven based on the depth of the prior panic – but also do not take into account the potential positive, unpredictable events that are just as recurring as the negative ones.

  30. Transor Z says:

    I’m just looking at the cover — and disagreeing with what my friend Paul said — it is not IMO a contrary indicator.

    Barry refuses to judge a cover by its book — Boo! LOL :-)

  31. Tom Petruno says:

    As U.S. stocks surge, do small investors now want in?

    It’s looking like more individual investors just can’t stand being on the sidelines anymore as the stock market continues to rally.

    The net cash inflow to U.S. stock mutual funds in the seven days that ended April 7 was $1.94 billion, the largest one-week inflow since mid-January, the Investment Company Institute said Wednesday.

    In the prior two weeks the funds had a net outflow totaling $1.05 billion.

    These weekly numbers aren’t huge relative to domestic stock funds’ total assets of $3.6 trillion. But it’s the trend that counts: As everyone knows by now, individual investors have been pouring money into bond mutual funds over the last year, while from August through February they were mostly net sellers of domestic stock funds — meaning redemptions from the funds exceeded purchases for most of that period.

    A sustained inflow of cash from small investors could provide another source of fuel for the 13-month-old bull market, which staged another broad advance Wednesday

  32. TakBak04 says:

    @Tom Petruno Says:

    sustained inflow of cash from small investors could provide another source of fuel for the 13-month-old bull market, which staged another broad advance Wednesday

    ———

    They can’t wait to get their hands on my money……..But…I’m being a “Sly Fox.” Waiting …..

  33. Paul Jones says:

    Psychology isn’t driving the market, intervention is.

  34. TakBak04 says:

    @Paul Jones Says:
    April 15th, 2010 at 6:38 pm

    Psychology isn’t driving the market, intervention is.

    —–

    Possibly why the savvy investors who’ve “been around the bubbles” too long are hanging back.

    Those who’ve been around have watched this crap for a few decades…..and are too close to losing it all to be agressivly “back in” inspite of what Newsweek, Time, BusinessWeek, WSJ or anyone else is telling them to do. It smells bad…such complete capitulation …even if we know that Obama Admin is keeping the same Crooks who inflated and deflated baloons/bubbles…and they can drive this one to the Mid-Term elections and beyond…. It still says…many have been so burned so many times their sense of outrage went off the meter. If they have money…they want SAFETY….

    Not saying that many won’t cave with all these “Great Green Saplings rising into the Forest from those “tiny green shoots” over a year ago, though. Just depends on your situtation……..

  35. Donald says:

    I forgot which economist said “if the market makes the cover of Newsweek, it’s time head the other way!”

    This sums it up for most us, self included:

    But chances are either you or someone you know isn’t getting the benefits. Maybe they’re in foreclosure or struggling with credit card debt. For them, there could have been some small comfort in knowing the system was held accountable instead of preserved and made more menacing.

  36. TakBak04 says:

    @Donald Says:
    April 15th, 2010 at 7:38 pm

    I forgot which economist said “if the market makes the cover of Newsweek, it’s time head the other way!”

    This sums it up for most us, self included:

    But chances are either you or someone you know isn’t getting the benefits. Maybe they’re in foreclosure or struggling with credit card debt. For them, there could have been some small comfort in knowing the system was held accountable instead of preserved and made more menacing.

    ———-

    There could be a “Price to Pay” for us if “Justice/Legal System” has failed to work once again. There’s just too much of this “sweeping criminality under the rug.” It might not occur for awhile…but at some point the “real people” will rebel…and it will not be good for our Country or our System of Living here.

    That’s the concern. And, it isn’t a trivial one…it’s just being “moved off” by one more administration until it all crashes.

    JMHO…. but not good for down the road, although some money can be made before those who have gained can get on the private planes or commercial to get the hell outta here, to those places of their “paradise” they’ve put a stake in.

    The rest will be left to rebuild.

    I’m not a “survivalist…with canned goods piled to the ceilings and a well out in back that’s been tested and the “root cellar” carved out to hole me up.

    I’m pretty much an average investor who is corporatist by profession ….but am feeling very worried about all of us.

  37. crjdriver says:

    Somewhat on Topic but I just couldnt stand all the Recently Bullish Recovery Bombardment by the media recently and took a very modest short position out today on the NDX100 . I know top picking is a fools errand and internals still strong but how many weeks straight up now?

  38. RC says:

    BR has said in the past that this downturn “rhymes” with the 1973 downturn.
    If you put the 1973 Oct to 1976 Apr and 2007 Oct to 2010 Apr, the pattern is identical.
    So, I am with BR (and Dan Gross) on the recovery and also hoping that the market pattern “rhyming” (with the ’73 crash and recovery) continues.

  39. crjdriver says:

    @RC if that analog holds true arnt we due for a most nasty 10%+ correction rather soon?

  40. TakBak04 says:

    crjdriver Says:
    April 15th, 2010 at 8:17 pm

    @RC if that analog holds true arnt we due for a most nasty 10%+ correction rather soon?

    ——-

    BR has warned us of a 20 to 30% correction at some point…but, I’ve assumed he meant that as a warning to put stops or “protection in” if you are a trader.

    He’s not said whether that correction will be another time to “buy in,” until the next shoe somewhere down the long road drops. BR is sounding more bullish…but the Bulls seem to be getting ready for euphoria.

    Who knows. Some might get in with the next 20 to 30% drop…and make some bucks with “tight stops” and the rest…then off to the races to 2012?

    Possible…but given the froth out there in China, Canada and other spots…and the constant wars, threats of war….is it going to be a smooth ride? Then there’s that niggling climate thing…and some earth instability with these earthquakes which could either be good for more stimulous spending or finally reach a point where there just isn’t the money to do rebuilding and prop up markets in every country where a catastrophe is possible.

    Interesting Times.

  41. cognos says:

    So… if the economy is so bad… why?

    – did INTC just post its best Q1 ever? (watch a few dozen other blue chips follow suit)?
    - are NFP employment numbers most recently +150k (from -700k a year ago)… will be +250k, +350k…?
    - is the ISM up 20 pts in the last year… best indication (delta) on that major econ measure since 1983?

    - are major banks like C, BAC, WFC, GE up 20-50% in Q1 and small, riskier regional banks up 30-100%?
    - are mortgage credit bonds up 10-30% in Q1 and up another 10-20% this month alone?
    - are REITs (GGP for ex) being refinanced and bought up in M&A deals?

    - are employers starting to annouce higher guidance, capital investment and hiring for 2010 — HD, JPM, BAC, have recently announced increase head-count plans. Over 100 companies will annouce the same this Q.
    - are dividends and buybacks being increased at the fastest rate ever (Q1)
    - is Apple selling every iPad it can manufacture? (Roughly $1B sales in month #1, in the US alone!)

    - out of 19 “major eps events” so far… we have 13 “beats”, 5 in-line (+/-5%), and 1 “miss”… despite huge expectations.
    - wait a few weeks… companies will start saying – as they did in mid Q1 – “Q2 ALREADY looks strong”.

    We are roughly 1/2 way through the easy part of the economic recovery… from here hiring solidifies the [proft = investment and hiring = profit] cycle. Recovery process is self-reinforcing.

    Looks like an easy path to 1,500 on SPX over the next year or so… and then material risk of continued upside into a tech / innnovation / global demand story.

  42. beatstreet says:

    My nomination to the Business Week Contrary Indicator Hall of Fame was the Sunday article in the NYT titled “Interest Rates Have Nowhere to Go but Up”

    http://www.nytimes.com/2010/04/11/business/economy/11rates.html?src=me&ref=business

    Contains this soon to be classic line …

    “But the consensus is clear, according to Terrence M. Belton, global head of fixed-income strategy for J. P. Morgan Securities. “Everyone knows that rates will eventually go higher,” he said.”

  43. micron26 says:

    In our undergrad days, Daniel Gross and I both were members of the Cornell Daily Sun’s Board of (weekly) Columnists. Dan has learned a bit over the years, but at heart he still remains the superficial popularity seeker (respect my cleverness!) he was more obviously in those days. For anything resembling a thoughtful analysis, look elsewhere.

  44. orangeshirt says:

    @VennData

    You need to do a bit more reading before trumpeting the Singapore health case system. Here is a good article:

    http://theonlinecitizen.com/2007/05/singapores-healthcare-system-uniquely-singapore

    You don’t see people from all over the world flocking to Singapore for great medical care. However, you do see that to the US. Why is that?

    There are many flaws in the Singapore system. Read that article.

    If our country wanted to do what Singapore is doing in order to say we “offered universal healthcase to all citizens”, everyone would be up in arms about the quality of care, within months. (Read about the class of wards… you can opt to downgrade if you feel you’ll be there longer, to save money…etc.)

    The devil is in the details.

  45. RC says:

    @crjdriver,
    Well, if you have done the comparative research of the two periods then you know where the S&P was at the beginning of the year (10% below the pick in Oct 73). But since this recovery is expected to be not as strong as that one (the damage was more severe this time around) I am not quite expecting S&P to be there that fast.

  46. rootless_cosmopolitan says:

    cognos,

    So… if the economy is so bad… why?

    – did INTC just post its best Q1 ever? (watch a few dozen other blue chips follow suit)?

    I would think that corporations that are major players on the world market like INTC get best through a difficult economic environment like the current one. INTC has an extraordinary product line of central importance for computer technology all over the world. So why wouldn’t such a company belong to the ones that 1. suffer the least from the world recession, 2. profit most from a rebound of the world economy from a cyclical low due to unprecedented government stimulus all over the world?

    However, how representative are INTC and similar corporations, which produce globally and for a global market, for the state of the US economy as such? The Intel results are great for capital owners and investors in Intel, but isn’t the state, for instance, of small businesses in US much more representative for the state of the US economy, when it’s about the every day life of people living and working in the US who don’t belong to the owning and investing class? And how is the recovery of small businesses going forward? Please do tell.

    The stock market is not a reliable indicator for the current health of the economy, and even less for the future.

    Looks like an easy path to 1,500 on SPX over the next year or so… and then material risk of continued upside into a tech / innnovation / global demand story.

    Considering current projection of $100 “operating earnings” per share for 2011, an S&P 500 at 1500 would be overpriced by 15 to 25%, relative to the historical normal of the P/E ratio. And we will see how well those analyst projection for eps growth are going to match reality. Analyst projections are overbullish on average. 3 and 5 year projections for eps growth have been almost a 100% too high on average for the last 25 years. Only for a few cases with maximum earnings per share growth, projections matched or underestimated real eps growths.
    (Source: https://www.mckinseyquarterly.com/Equity_analysts_Still_too_bullish_2565)

  47. cognos says:

    Rootless says:

    “3 and 5 year projections for eps growth have been almost a 100% too high on average for the last 25 years”

    Thats just not true. Was that true in 1985? 1995? 2002? 2009? (Those 4 obs on “3-yr eps” represent 12/25 years… or 50% during which proj were WAY too low).

    McKinsey was give risk/trading recommendations in 4-of-5 financial failures and govt regulatory bodies in 2007 and 2008. This do piss-poor work. Its hilarious that people pay them.

    Then, I suspect there is a classic “fallacy of averages” going on.

  48. SOP says:

    This is insane – maybe not a contrary indicator by the standards Barry listed above, but still insane.

    Time’s piece Why Young People Should Buy Stocks on Margin

    http://www.time.com/time/business/article/0,8599,1982327,00.html

    Let the kids leverage up in their IRAs. Next, TIME will publish medical advice by VooDoo doctors and Male Enhancement Products Inc.

  49. rootless_cosmopolitan says:

    cognos,

    Thats just not true.

    Prove it. Or is it “not true”, because you don’t like the result?

    Was that true in 1985? 1995? 2002? 2009?

    Yes, No, Yes, not in sample, according to Figure 1 in article.

    (Those 4 obs on “3-yr eps” represent 12/25 years… or 50% during which proj were WAY too low).

    What a nonsense reply is this? You can’t refute a statement about a statistical average by saying that the value had been lower than the average for four out of all cases that are in the sample. Those four years would be 4 out of 25, not 12 out of 25.

    McKinsey was give risk/trading recommendations in 4-of-5 financial failures and govt regulatory bodies in 2007 and 2008. This do piss-poor work. Its hilarious that people pay them.

    Tu quoque argument.

    Then, I suspect there is a classic “fallacy of averages” going on.

    Why do you suspect this? At what point would this fallacy have been applied?

  50. rootless_cosmopolitan says:

    cognos,

    You also wrote:

    - out of 19 “major eps events” so far… we have 13 “beats”, 5 in-line (+/-5%), and 1 “miss”… despite huge expectations.

    When were the estimates provided, for which the comparison between estimated values and actual values is made? Up to one day before the earnings releases?

  51. David Collum says:

    The real estate top was called, to the minute, when Sam Zell sold out at $38 million. That was not a contrarian top with all its subtleties. That was an above-the-fold headline.

  52. David Collum says:

    Billion that is. I get lost in the zeroes