Posts filed under “Markets”
I don’t know why, but I am not surprised:
The world’s biggest financial services firm on Thursday dismissed its entire stock market technical analysis team, including longtime analyst Louise Yamada, who led the group. Yamada had been with the bank for nearly a quarter of a century.
The firing of Yamada and her team of assistants is part of an effort by Citigroup to control expenses. Last week, Citigroup fired six other analysts, and the company is planning to eliminate up to 1,000 jobs from its global corporate and investment banking division.
Under technical analysis, charts and computer programs are used to project price trends in stocks, bonds and the broader market. The practice makes minimal use of economic fundamentals and is not without its critics on Wall Street.
"While a difficult decision, we believe focusing our research investments toward fundamental company coverage best positions Citigroup to succeed in an increasingly competitive environment,” said Bill Kennedy, director of global equity research, in a note to staff.
During her tenure at Citigroup, Yamada was quoted frequently by the financial press and often appeared on CNBC. In 1998, she published a book on market analysis called Market Magic: Riding the Greatest Bull Market of the Century.
I suspect the problem wasn’t Yamada or the quality of her work. Rather, the more likely issue is that anyone can learn basic technical skills; I cannot reall ever meeting a trader who didn’t use at least some form of charting software. Indeed, the ubiquity of powerful workstations on Main Street removed a big edge that Wall Street had.
Still, this passion play may not yet be over. Imagine how short-sighted this move will look if Yamada & Co. set up shop elsewhere, make a great market top call, while Citibank clients get slaughtered in a crash.
Saved a few dollars in salary, though . . .
Citigroup Eliminates Stock Technical Analysis Group
TheStreet.com, 2/17/2005 3:53 PM EST
Joe Granville is a
very well regarded technician (now in his 80s) who has had some terrific calls in his career, and a few duds as well. On Bloomberg, there was a story on his most recent commentary, but I cannot seem to find it now; It more likely got moved than disappeared for nefarious reasons.
Anyway, Joe just got Bearish big time. Here’s an excerpt:
"Joseph Granville, who accurately forecast in 2000 that U.S. stocks’ bull market would end, is at it again. He expects the Dow Jones Industrial Average to suffer its biggest annual loss this year since the Great Depression.
“We’re in the critical portion of a coming collapse and the market’s screaming to get out,” said Granville in an interview from Kansas City, Missouri. “Everyone’s bullish. There’s going to be a tremendous surprise and it’s going to be to the downside.”
"Granville, publisher of the Granville Market Letter since 1963 and a technical analyst for almost 50 years, also foretold a stock-market decline in 1976. He misfired in 1982 and 1995 by calling for losses before share prices surged.
The 81-year-old analyst expects the Dow average to retreat to at least 7400 by year-end. The forecast amounts to a plunge of 31 percent. The last year in which the benchmark fell that much was 1937, when it lost 33 percent.
As a technical analyst, Granville predicts the market’s direction by using criteria such as trading and price patterns, rather than earnings and economic growth. He started developing his stock market theory at what was then E.F. Hutton & Co., a New York-based brokerage, from 1957 to 1963."
That bodes well for my 2005 forecast, as Joe tends to be early. I’m still looking for one last strong move up — Dow 11,700, Nasdaq 2600 — before it all heads south. Note that also gives me the opportunity to stay long if the uptrend remains in tact.
One of the key mistakes to avoid – call it the peril of predictions — is to never marry a forecast, especially your own. People wrap up too much ego in what is essentially educated guesswork. If you start with the assumption that your prediction is going to be wrong, its real easy to reverse yourself when necessary . . .
If you are interested in learning more about Granville,start with this article — Just Like Old Times as Joe Granville Yells `Sell’ — it gives some background on him if you are unfamiliar with his work.
Some more background on Granville:
Timing the Market
Joe Granville, father of the On Balance Volume (OBV) and its analysis
Bibliography of Published Books
UPDATE: March 18, 2005 7:09 am
Mark Hulbert provides the details on Granville’s track record. Not impressive (unless you are a fan of the Black Swan event . . .)
UPDATE: I still cannot find this anywhere, but a friend captured the text. Here it is for your enjoyment: