Andrew Smithers is expecting a “significant rally” in US stocks which will provide an opportunity for investors to sell before equities resume declines.

Companies are cashed up and likely to buy back shares at a time when price-to-earnings ratios are low, providing a trigger for a short-term rally. Smithers had previously claimed stocks were overvalued in 2000 before a near 50% decline over 2 1/2 years. Even after the recent rout, U.S. stocks are about 40% above fair value, the president of research company Smithers & Co. said in an e-mail on Aug. 18.

The full article is worth the read, but here is the money quote:

“There is a good chance of a rally because of the cash position of U.S. companies, their tendency to buy shares when they have high cash ratios and the importance of company share buying on the stock market. A 10 percent rally would be an opportunity to sell.”

I concur . . .


Smithers Sees ‘Significant’ S&P 500 Rally
Anna Kitanaka
Bloomberg Aug 22, 2011 2:20 AM ET

Category: Trading, Valuation

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.

20 Responses to “QOTD: Andrew Smithers Says “Sell The Next 10% Rally””

  1. [...] QOTD: Andrew Smithers Says “Sell The Next 10% Rally” Barry Ritholtz. My sentiments exactly. [...]

  2. jaguar6992 says:

    Yes, but: “This isn’t the first time Smithers has said the market is expensive. In October 2009, he said the S&P 500 was about 40 percent overvalued and would drop as central banks were likely to wind up programs to stimulate the economy during the global financial crisis.”
    He may be right this time, but he missed a lot of upside over the 18 months following his Oct. 2009 call.

  3. mhb2012 says:

    Smithers…a pop? Sees a rally? Not exactly a ” Profiles in Courage ” mkt call. Everyone else sees it too – just differing on direction after that. Trend is broken – machines will play the bounce.Oversold – duh? ” Never Again ” 08′ CNBC lemmings may not hang around to see the end of this movie and final credits.

  4. says:

    The great crash – pass.

  5. Moss says:

    It will all depend on what Bernanke has to say on Friday…. The rally that is.
    Maybe he has another 1.2T up his sleeve.

  6. PDS says:

    BR …. You concur? With a 10pct rally in stocks? So that means investors in your tactical fund that is currently 100pct in bonds (as of last week according to your posting on Aug 18) will significantly underperform…..correct BR?


    BR: I concur we are oversold, likely to rally, and then roll over.

    I don’t know how Smithers runs money — but there is a difference between trying to be tactical, and going after every squiggle.

    Now take a deep breathe and relax, you crazy bastard.

  7. Clem Stone says:

    The market will probably rally but It doesn’t have anything to do with cash on corporate balance sheets. Lots of cash was there 3 weeks ago, lots will be there after a major rally, and lots will be there after another major decline.

  8. Winston Munn says:

    I”ve been scaling in using the buy and hold method: first I buy; then I hold my breath.

  9. PDS says:

    Not surprising response BR..or lack thereof….I guess it really is your sandbox…oh sorry…i mean cocktail party…what is curious is your lack of professional ability to take it…but you sure can dish it out! As a professional money manager you must be asked to acccount for your strategy etc….but when asked to defend here…. it’s jibe ho!

  10. PDS

    I have to walk the line between being moderately public about what I do with assets under my charge, and maintaining a reason for clients who are paying me for proprietary advise to keep doing so.

    AI have made this much very clear over the years: I am interested in THE BIG PICTURE — not chasing every squiggle (nor are my clients). However, when I see something I think is interesting, it gets posted on the blog.

    Now, that’s rather different than tolerating nonsense from haters.

  11. wally says:

    I think there is risk in thinking the current slowdown will be a repeat of the last one. I don’t see much upward movement this fall or winter, but I think next spring will see a stronger upside than is now forecast.
    The missing cylinder for the economy right now is construction; if that were firing the unemployment rate would be down to reasonable levels and there would be a significant percentage improvement to consumer spending. The negative ‘hoodoo’ is now cast on single family housing… but population increases and household formation are constantly happening. Where that pressure could break out is in construction of apartments. One leading indicator there will be architectural billings, which has not yet happened.

  12. wunsacon says:

    LOL. Winston, you devil!

  13. SivBum says:

    LOL! waiting to exhale on QE-3?

    “Winston Munn Says:

    August 22nd, 2011 at 8:41 am
    I”ve been scaling in using the buy and hold method: first I buy; then I hold my breath.”

  14. WaveCatcher says:

    Sad to see this post because it’s exactly what I’ve been saying and now the “10% rally, then sell the rally” trade is beginning to get crowded.

  15. constantnormal says:

    What’s this “rally” that everyone is so worked up about? When d’ya think we might see it?

  16. constantnormal says:

    … suppose … that Bernanke actually HAS a spine, and there is no QE3 … I don’t know that this might be the case, there has certainly been no evidence of this to date … but surely even HE can see that QEn is highly unlikely to work … even as poorly as the previous QE’s worked, assuming that they were intended to have some beneficial impact on the economy as a while …

  17. [...] Andrew Smithers thinks the equity market is set for rally, that should be sold into.  (Bloomberg, Big Picture) [...]

  18. [...] noted in the Smithers piece, markets may be due for bounce — he thinks due to buybacks, I think due to oversold [...]

  19. PDS says:

    So BR….how do u rationalize how u hold other money managers to a higher standard ie B. Biggs recently….but when clarity is requested about ur own public comments re ur investment strategy u get hostile


    BR: Barton Biggs was the subject of 5 or 10 headlines — these are market calls he chose to make publicly. Those BUY EM calls are what he made publicly in the media — all I did was point out they were bad calls.

    Your beef was that I wasn’t being more public with my calls, that I wasnt opening my kimono further.

  20. attilahooper says:

    A 10% rally !? Awesome, but from what base ? DOW 9000 ?? 8000 ?? 7000 ??