File this one under Duh!

The cover story in Barron’s looks at some of the usual denizen’s of the Street’s biggest shops. They are, as is their wont, bullish and long and not particularly concerned about a recession (Its priced in!) or another leg down in Housing (its cheap!) or the market’s technical signals (we’re finding a bottom!) or deleveraging (sorry, the term is not familiar).

Most see the “economic data stabilizing and then improve instead of worsening“. If they are wrong, they perceive the downside risk to (WTF?) all of SPX 1,000. The Bear in the group is Douglas Cliggott, Credit Suisse’s U.S. equity strategist. He lowered his year-end S&P target to 1100 –less than 7% from Friday’s close (it was at 1275). Strategas’s Jason Trennert correctly notes the major indexes’ moving averages have broken down. Even he sees only a 35% probability of a recession next year, and a flat finish (SPX 1165) at year end from here.

My issue is not whether these gentlemen are right — perhaps they are — or wrong — which they frequently can be.

Rather, its that their (or their client’s) enormous assets under management (AUM). It prevents them from being anything other than Long & Strong & often Wrong (the club to which they Belong). They may have a methodology, but it doesn’t really allow much other than Buy & Hold, which is all you can do with $100s of billions or even trillions in AUM. Its a rare strategist who can manage risk or protect capital; Forget beating the market — they ARE the market.

Hence, a bullish bias is built into their views. That serves them well during secular bull markets (i.e., 1982-2000) but its punishing during secular bear markets (1966-82; 2000-present).

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Click for forecasts from Wall Street Strategists


Source: Barron’s

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Source:
Which Way Up?
VITO J. RACANELLI
Barron’s September 3, 2011
http://online.barrons.com/article/SB50001424052702303544204576542623047983688.html

Category: Investing, UnGuru

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.

23 Responses to “Wall Street Strategists Are (Surprise!) Bullish”

  1. dead hobo says:

    BR noticed:

    Rather, its that their (or their client’s) enormous assets under management (AUM). It prevents them from being anything other than Long & Strong & often Wrong (the club to which they Belong). They may have a methodology, but it doesn’t really allow much other than Buy & Hold, which is all you can do with $100s of billions or even trillions in AUM. Its a rare strategist who can manage risk or protect capital; Forget beating the market — they ARE the market.

    reply:
    ———
    Thank you for finally noticing this. I remember writing on this topic here past the point of nausea for many many months. Thank you for the vindication.

    ~~~

    BR:. There is nothing new in this — its been staple of my beliefs for 20 years !

  2. Nuggz says:

    “Forget beating the market — they ARE the market.”

    This entire article could have been written with these 8 words.

    Personally, I think that this kabuki dance going on with the market is very good at driving the next bubble: gold. After that explodes(shortly), calmer minds will prevail.

  3. There should a disclaimer on their utterings. Big, slow moving beasts

  4. Concerned Neighbour says:

    Perhaps this explains why the “market” can do things like rally 8% in less than two weeks when there is no positive news to justify such a move.

    These people are part of what is wrong with the market. They are salesman and exhibit no fiduciary responsibility. Like real estate agents, now is always a good time to buy according to them. After all, if you don’t buy now, you’ll be priced out forever!

    I hold such people in very low regard. Sure, it’s their job to be perma-bullish, but it doesn’t have to be their job. They can always find others.

  5. dmunson says:

    Almost all are overbought treasuries.

    So, the real market sold all it’s treasuries to them during this period.

  6. Petey Wheatstraw says:

    The parasite probably always thinks it’s doing well . . . until the host dies or finds a cure.

  7. mersault says:

    Exactly why I don’t trust any analysis coming from those employed by banks and large investment houses. There is already an inherent upside bias in all of financial media, but it’s particularly concentrated when one has so much skin in the game (as these folks do).

    One interesting example I keep hearing from people employed by banks when asked if the banks are healthy is this: “the banking sector is in much better shape than it was three years ago.” They won’t say the banks are healthy or unhealthy as a current state, they will only claim relative health. It’s almost as if a PR agency came up with this response. It sounds positive but doesn’t answer the question at all.

  8. Sunny129 says:

    ‘These people are part of what is wrong with the market’

    This is the potential to exploit the ‘disconnect between perception and reality’! for those who manage the portfolio on their own! I had my best weeks since the beginning of August but I do not discount the power of perception. The vested interests have a way of coming out with temporary ‘kakamania’ solutions to which market gos ga-ga! I trade with hedges with these irrational bouts in mind. There is still too much HOPIUM out there!

    Perception has been the winner since March ’09 and again since Aug ’10 b/c of Barnake’s put, easy money, TARP, TALF and of course M to Model accounting! But they have faded.

    Now the Banks holding those MBSs whose value continue to erode, as the Housing cratering continues but masked by FASB 157, are facing tsunami of suits from regulators, their fellow institutions in the FIRE Economy and also private suits. Their dirty DEEDS are seeping out in courts all over the country!

    The power REALITY is progressively gaining over the power of PERCEPTION being built by spin doctors but these money managers don’t get it. But that’s ok with me!

  9. adsanalytics says:

    Interesting how the general feelings is “economic data stabilizing and then improve instead of worsening“ while all leading indicators are heading south such as the ones we track here:

    http://www.adsanalytics.com/dashboard/docs/dashboard.php?treepage=tree_definition_main.php&chart=chart_cfnai

    Our own leading indicator has dropped again this month (-1.7%); it is down for the 5th time out of the last 6 months.

    http://www.adsanalytics.com/report.php?report=lcir

    That said, backtested future returns are still pointing to the upside, though an inordinate amount depends on what will happen with the US and EU fiscal and political environment as well as the market’s meme du jour re mortgage lawsuits against the major banks.

  10. seneca says:

    I like how our stalwart band of market strategists fearlessly state the obvious, that treasuries and gold are “overbought,” while avoid going on record of predicting an actual fall in prices.

  11. VennData says:

    Don’t listen to “the elites.” Listen to regular folks…

    “…Men, seniors, middle-income Americans, and Republicans are more enamored with gold…”

    http://www.gallup.com/poll/149195/Americans-Choose-Gold-Best-Long-Term-Investment.aspx

    They are right, those egg-headed, misshapen, academic types don’t know nuthin’.

    Go with your gut. Go with the TV ads. You will be rewarded in the long run with your vast overweight to gold. Look at what it’s done. Buy more.

    Obama has ruined America, but he can’t ruin gold. And in 2012, we will ruin Obama ( and be twice as rich with all our gold) and if we are forced to secede by Obama’s black helicopters, we’re taking Fort Knox with us… what’s left of the gold in there anyway.

    Rick Perry

  12. jj2me says:

    The ending for that list, “or deleveraging (sorry, the term is not familiar),” made me laugh out loud.

  13. Frilton Miedman says:

    It’s no mystery what our problem is (demand, not supply), the only mystery is the number of FOX viewers that still buy what corporate puppets generically repeat over and over…..”Look at what Obama’s done”.

    $4 trillion Spent on two wars that benefited defense contractor/friends like HAL – Bush/Cheney

    $3.25 trillion spent in pointless tax cuts for the same group of friends, while recipients of those “job creating” tax cuts ship jobs to China

    $1 Trillion lost every year in tax loopholes that do not “create jobs” as promised. (Per Alan Simpson (R) after researching treasury data & records for the Simpson-Bowles report)

    Total percentage Obama’s stimulus that accounts for the current debt is 5%, and of that, 40% of it is tax cuts, NOT “uncontrolled spending”….meaning the “uncontrolled spending” Obama has done amounts to 3% of the debt.

    Just to spite, though I did not vote for Obama last time, he gets my vote this time.

  14. tomrus says:

    If you think the stategists are too optimistic, you should see the analysts. Darrough and Russell noted the following:
    Abstract:

    A Positive Model of Earnings Forecasts: Top Down versus Bottom Up:
    Journal of Business, Vol. 75, No. 1, January 2002

    This article analyzes the behavior of two groups of corporate earnings forecasters: analysts, who follow individual company fortunes, and market strategists, who predict earnings for various company aggregates. Using data for two market indices, the S&P 500 and the Dow Jones Industrial Average, we document that bottom-up forecasts are systematically more optimistic than top-down forecasts made by strategists. This difference is not driven by the difference in the forecast target. This finding may be explained by the incentives that analysts face and/or by cognitive bias.

  15. Through the Looking Glass says:

    How perfect is it that the Chinese who started the philosophy of Yin and Yang (the equal and opposite forces of good and evil balance each other out ) are now the ones to be the global balance of the evil empire we have created here in the name of the god endless liquidity. They will go down in history as the one that tamed this dragon the US of A ‘s infant philosophy of hegemony and greed rules before they adopt it themselves. Sometimes its not who has the most guns, money, that rules the neighborhood,planetarily speaking,but who was here first.
    Wait till Russia, China and Germany band together to take the place of USA as the forces of good on earth. They don’t care much for the “best and brightest” sphincters on Wall Street and neither do I.
    Money rules is the paradigm that got us here and gets guys like “market strategists” out of bed every day.
    What will the end of a paradigm , look like? Know how to garden?

  16. philipat says:

    Why can’t they be replaced by robots? Same thing, lowers cost for all.

    It might help if Business TV applied some sort of accountability standards on these folks, along the lines of “Lst time we had you on, you said…”. Of course, that would then make it more difficult to get the vast majority who are just talking their book to appear and so the free programming would end. There we go with the parasites analogy again!

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  18. BigBlueCrab says:

    I keep waiting for the shoe to drop with Calpers…there model was to be fully invested 100% based on 8% growth/yr. They lost 18B in July, Aug?, Sept?? Me thinks there are going to be some disappointed teachers and cops in Cal. The fund Mgrs?…you can probably reach them in Monaco or Paraguay….Oh well, business in America.

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