Hedge Fund Consultant Michael Belkin spoke at The Big Picture conference, predicting a 40% stock market drop in the coming 12-15 months. Belkin joins Sam Mamudi to discuss his case for a market drop.


10/15/2012 1:43:26 PM4:14

Category: Cycles, Earnings, Video

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.

6 Responses to “Michael Belkin Predicts 40% Stock Market Drop”

  1. denim says:

    Nothing like being cautious. But Ritholtz investing rule number 2 says
    “Avoid predictions and forecasts: Humans are very bad at guessing what the future will bring. The academic literature overwhelmingly proves this.

    If you prefer anecdotal evidence, recall how many economists forecast the Great Recession (almost none), the initial reviews of the iPad (mostly panned) or even the iPhone (meh!).

    For your own investing, you should ignore other people’s forecasts. And you should avoid making any yourself. Why? Because when investors make forecasts they focus more on being right than making money. They unconsciously shift their portfolio toward their predictions rather than what is occurring in the markets. This is a recipe for disaster. Consider how many people completely missed the huge rally since the March 2009 lows, mostly because of forecasts of another crash. They were rooting for their prediction, instead of spotting the opportunity.”

    And besides, this time is different. Bernanke learned from Eccles who learned recessions and depressions the hard way. It is the Fed’s job to stabilize prices…and that includes the weighted price of the means of production, i.e., the market. He has done this before and he will do it again and again unless an idiot replaces him with an idiot.

  2. romerjt says:

    His hairdo suggests he’s contrarian.

  3. Same as Denim

    Don’t forget Ritholtz rule number 2.

    If Michael Belkin is right the market will tell us. For those like I followers of the Dow Theory, we will see a bear market signal. Since Dow Theory tends to be more responsive than moving averages, sell signals are flashed at ca. 10% from the top. Not so bad and in the meantime it allows the investor to participate in the trend until exhausted.

    Thus, the Dow Theory also complies with Ritholtz rule number 1: Cut your losses short, let your profits run.

    Under Dow Theory, we always know how much we stand to lose whereas the profits are open ended.

    However, it is always good to hear what learned people have to say. It helps us determine whether we are in the last phase of a bull market or in the beginning and whether fundamentals provide head or tailwind. By factoring those “fundamental” factors in, we can better allocate funds between assents, thereby complying with Ritholtz rule number 5.

    In other words, if we were living in 1997 when everything seemed rosy, I’d allocate more money to stocks and less, i.e. to gold. If valuations and carefully selected macro studies suggests that there is headwind for stocks, then we may decide to allocate more assets to gold.

    Nonetheless, either with big or small stock allocation, my stops are going to be the same: they will be determined by the Dow Theory and will tell me when to cash out. In 70% of the instances, I’ll finishwith profits, in 30% of the instances with contained losses.

    More on how to place technically effective stops with the Dow Theory here:

    http://bit.ly/OAhUXt

    Furthermore, such fundamental-based forecasts may be useful in determining the risk/reward ratio of the prospective stock investment. If we believe the forecast is likely to be proven right in the future, we may moderate our profit’s expectations. Thus, not all Dow Theory bull markets are created equal. Some return 80% whilst others return a meager 25%. The macro view may help us determine the odds.

    Nobody said investing was easy…:=)

    Regards.

  4. OscarWildeDog says:

    Like Karl Popper and Nassim Taleb say, “Nobody knows anything.” Not to be outdone by “It is impossible to predict.” I get it – put a guy who looks like a dead squirrel on your website and, Voila! Instant expert.

  5. victor says:

    @OscarWildeDog: I like your post; erudite and funny too.

    BR: do you ever re-visit the predictors’ predictions? Belkin gave himself enough space (12-15 months) for his prediction to either be forgotten (if a pan) or for him to trumpet his clairvoyance and score points with the naive crowd of investors, i.e. make a name for himself. As for me, I’ll stick with Ben Graham and John Bogle.

    ~~~

    BR: I am no fan of predictions. However, Belkin’s reports are less predictions than comparatives between different asset classes and sectors. (He does often say “The model forecats that…”)

  6. steele75 says:

    Very interesting this guys looks a bit like a failed artist/scientist, his prediction is not that far off, historically speaking most bull markets last between 40-45 mths, (this is historical data for the last 100 years) after the bull market ends you get between a 30 to 40% drop in stocks I assume this is for stocks that have participated in the bull market. This basically means financials should continue to rally in line with a bounce in home sales and new starts.

    In a nutshell we are right at or near the end of the cycle before we hit a big fall. I believe the fall will be triggered by Europe perhaps Italy the next bail out candidate.

    ~~~

    BR: Former Salamon Brothers analyst