Dow 15,000: Is this an Outlier Call or Consensus?

Friday, February 17th, 2012

Sources:
Feb. 13, 2012 – (Bloomberg) — Jeremy Siegel, professor of finance at the University of Pennsylvania’s Wharton School, talks about the outlook for U.S. stocks, and his call for the Dow to reach 15,000 by the end of this year, and possibly even 17,000 over at least the next two years, with Trish Regan on Bloomberg Television’s “Street Smart.”

http://www.bloomberg.com/video/86292500/

Mon 13 Feb 13 – Is it too soon to call for a Dow 15,000 based on an article in Barron’s over the weekend? Jim Paulsen, Wells Capital Management shares his thoughts. | 04:06 PM ET

http://video.cnbc.com/gallery/?video=3000073016

Feb. 13, 2012 – Bob Doll, of BlackRock, discusses the likelihood that the Dow will hit 15,000 in 2012.

http://video.cnbc.com/gallery/?video=3000072922

Doug Kass says bullish sentiment is just to prevalent period. And he points to the following:
- Surveys showing a substantial rise in bulls and decline in bears over the last couple weeks
- Hedge funds have increased net long exposure
- Individual investors are putting money into domestic equity funds
- Famed bear Nouriel Roubini is optimist on the market
All told, that would suggest the next big move should be lower.

http://www.cnbc.com/id/46342627

Tags: Barron, Blackrock, Bloomberg Television, Bob Doll, Bullish Sentiment, Cnbc, Couple Weeks, Domestic Equity Funds, Doug Kass, Hedge Funds, Individual Investors, Jeremy Siegel, Likelihood, Nouriel Roubini, Optimist, Substantial Rise, Trish Regan, University Of Pennsylvania, Wells Capital Management, Wharton School
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Doug Kass Wonders Why Anyone Listens To Jeremy Siegel

Thursday, February 16th, 2012

Lately, everybody’s been talking about Jeremy Siegel’s latest bullish call on stocks.

On Saturday, Barron’s cover story highlighted Siegel’s call for Dow 15,000 within the next two years.

Yesterday, Bloomberg’s Trish Regan had the Wharton Professor on to further explain his call.

But Seabreeze Partners’ Doug Kass isn’t having any of it.

Kass, who famously called the March 2009 stock market bottom and nailed the 2011 S&P 500 close, aims to bring down the Jeremy Siegel bulls.

He groups Siegel with the likes of Meredith Whitney and Nouriel Roubini who made names for themselves with spectacularly successful calls, only to be followed by some pretty bad calls.

“[Q]uite frankly, the streets of Wall Street are paved with geniuses who have made one great call in a row,” writes Kass.

In his latest column on Real Money Pro, he expands:

Dr. Siegel comes off as a very nice person, but he is an academic who has been bullish at some very wrong times. Importantly, his theories regarding equities for the long term have been wildly off, as bonds have outperformed stocks for one, five, 10, 30 and 40 years, which, according to his investment thesis, is impossible.

His view on the fixed-income market also has been manifestly incorrect over the last two years. Dr. Siegel’s Wall Street Journal op-ed, “The Great American Bond Bubble” was wrong in its conclusion back in August 2010.

Kass also reminds us that back in July 2009, the Wall Street Journal’s Jason Zweig poked some holes in the data Siegel used in his research.

Earlier this year, Doug Kass wrote that that S&P 500 could “eclipse the 2000 high of 1527.46 during the second half of the year.” However, he recently changed his tone when be found out that Nouriel Roubini, Dr. Doom himself, turned bullish on stocks.

Read Doug Kass’s whole column at Real Money Pro >

Copyright © Business Insider

Tags: Barron, Bulls, Business Insider, Doug Kass, Dr Doom, Fixed Income Market, Geniuses, Investment Thesis, Jason Zweig, Jeremy Siegel, Market Bottom, Meredith Whitney, Nouriel Roubini, Real Money, Seabreeze Partners, Stock Market, Trish Regan, Uite, Wall Street, Wall Street Journal, Wharton
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Re-Evaluating “Chindia”: The Story of the Elephant and the Dragon (RGE)

Thursday, February 24th, 2011

The report below comes courtesy of Nouriel Roubini’s team of analysts at RGE.

The emerging market powerhouse known as “Chindia” is becoming a focal point of global attention as China and India show themselves to be growth dynamos of the coming Asian Century. But examining these countries’ intrinsic differences, is more illustrative than listing their similarities—and the two countries are likely to be on a divergent path over the next five years in the areas of growth, economic policy and politics.

China and India both entered the 20th century with large chunks of their populations in subsistence farming with medieval living conditions. Large numbers of people are leapfrogging generations of economic growth and development to join a modern services and manufacturing economy in the 21st century. Both societies are changing quickly, with different sectors and elites in the vanguard not just at home, but also in the international sphere. But the similarities between the two countries conceal underlying differences, such as India’s democratic, capitalist English common law vs. China’s authoritarian, state-led models of development. As fault lines in China’s export-led growth model emerge, bigger bets are being placed on India’s enormous potential.

India’s growth surge is occurring despite the government, China’s largely because of it. China’s economic miracle is a state-led, industrial revolution catch-up story, reflecting the efficiency of a strong, relatively centralized state in control. The main players are parastatals or foreign firms, which this communist country has protected from labor unrest. The ostensible results are superb: gleaming infrastructure, unprecedented for a country at China’s per capita income levels, with bullet trains, airports, roads, urban and increasingly extra-urban infrastructure, as well as productive capacity far exceeding current needs.

In contrast, India’s economic renaissance is led by a private sector struggling under the tethers of the “License Raj”—a mixed-economy hodgepodge of central planning and private capitalism with multiparty coalition governments that make U.S. gridlock politics look lightning fast. Businesses are thriving amid rising entrepreneurship, foreign investment, global competition and innovation but are facing bottlenecks of all kinds—whether overloaded transport infrastructure or petty corruption along transit routes that drives up transport costs. Much of the growth has come from entirely new sectors like information technology or internationally traded services that capitalize on India’s comparative advantages with a very large, cheap pool of English speakers, many with a very strong education and technical skills.

Looking ahead, China’s demographics are less than favorable for growth, but should support rebalancing. In 2011 China’s dependency ratio will bottom out, and its 15-29-year-old population will peak. The total working-age population will begin to decline in 2015, but labor supply constraints are already looking acute. In contrast, India is will see a demographic dividend, but structural factors will likely keep the country from fully capitalizing on it. India’s population and labor force will continue to expand through 2050, and the 25-39 cohort will not peak until 2030. The bulk of the increase in labor force will occur during this decade, with the median age rising to 28 by 2020. However, concerns about the poor quality of social services, low affordability of private sector services and a shortage of high- and low-end labor skills suggest that skill shortages will keep up the wage-price spiral.

China’s trend GDP growth will decline from about 10% in 2010 to 8% or so by 2015. Consumption will narrowly outpace GDP growth by 2012 or 2013, but structural factors will bring down the savings rate. Rising capital costs and nonperforming loans will constrain investment, which will begin to decrease as a share of GDP. By 2015, services’ share of GDP will rise while that of manufacturing and agriculture will decline slightly. India’s trend growth rate will rise above 9% in 2011-15 and will outpace Chinese growth starting in 2014. The rising services’ share of GDP will be offset by a declining agricultural share of GDP, while industry’s share is unlikely to increase. The saving-to-GDP ratio will exceed 40% by 2015, reducing consumption’s share of GDP and pushing investment’s share of GDP above 40% by 2014.

Nobody could accuse Chinese policy makers of being ignorant of their economy’s weaknesses, but they have not done much to address them either. The current Five-Year Plan looks much like the previous, and will sound the right notes for reform. The problem, as always, will be in the follow-through. The main constraint is China’s political economy, in which provincial leaders are rewarded for delivering strong growth and state-owned banks are hardwired to push out as many loans as hamstrung regulators will bear. The coming political transition in 2012-13 will make policy makers risk averse in the near term, but we are hopeful for change after 2013. On the political side, greater institutionalization within the Chinese Communist Party (CCP) and government should shift the country gently toward a rule-of-law system and away from the current rule-by-law model, where might makes right. There are signs that China is already heading down this path, with groups outside of the CCP having greater influence on policy making, but the process is likely to accelerate after the 18th Party Congress in late 2012.

India’s reforms in the 1990s and early 2000s laid the groundwork for the economy’s stellar performance, but the second phase of structural reforms has moved at a snail’s pace. Spending on populist social programs doubled between 2003 and 2009, yet did not enhance rural sustainability or the quality of services due to corruption and cost and implementation inefficiencies. The share of health care and education spending in total government expenditure has barely increased, while spending on ill-targeted subsidies has risen. With the government failing to provide key services, private sector investment in health care, education, labor training, utilities, infrastructure, R&D, agriculture and rural credit—sectors considered critical to increasing trickle-down effects, reducing structural inflation and benefiting from demographics and migration—will rise. Political aspirations to sustain 9-10% GDP growth will keep the economy vulnerable to overheating and asset bubbles, which would force policy makers to suppress private demand via tight monetary policies until supply-side bottlenecks ease over time. This, along with an unfavorable current account deficit financing structure, poses the biggest risk to India’s growth story.

As for corruption, increasing participation in civil society, use of technology in government projects, freedom of press and expansion of an educated middle class will gradually increase transparency and bring about institutional changes in administration and the judiciary. But this will happen from a very low base and will be a drawn-out process, given India’s centralized system, the immense disparities between states and the government-elite class nexus.

Source: RGE Monitor, February 23, 2011.

Tags: Asian Century, Bullet Trains, Centralized State, China, Communist Country, Different Sectors, Divergent Path, Economic Growth And Development, Economic Miracle, English Common Law, Fault Lines, Global Attention, Government China, Growth Model, Growth Surge, India, Infrastructure, International Sphere, Labor Unrest, Nouriel Roubini, Parastatals, Subsistence Farming, Urban Infrastructure
Posted in Credit Markets, India, Infrastructure, Markets, Outlook | Comments Off

Roubini: Question Marks in the Arab World

Monday, January 31st, 2011

The report below comes courtesy of Nouriel Roubini’s team of analysts at RGE.

Two MENA governments have suffered massive blows in the past week. Extended protests in Tunisia forced long-time ruler Zine El-Abidine Ben Ali to flee the country, while Hezbollah pulled out of the deadlocked Lebanese unity government, causing its collapse. While the Lebanese government’s fall was only the most recent setback in a country that has seen the rise and fall of several governments, the events in Tunisia are reverberating throughout the Arab world. Despite Arab leaders’ insistence on the exceptional nature of the developments in Tunisia, the underlying triggers—weak employment prospects, stagnant incomes, rising prices and a lack of representation—are common in much of the region. Using a selected group of economic, social and political indicators, we assess the resilience of the region’s institutions in our latest MENA Focus.

It is difficult to predict if other regimes will go the way of Tunisia, but the volatile mixture of economic grievances will add pressure to fragile political institutions in the MENA region and could temper investment. Arab leaders’ immediate response of boosting subsidies on food and fuel as well as other social transfers and their hyper-vigilance about protests suggest that these regimes may muddle through. Also, we continue to see strong oil prices in 2011 supporting growth in the MENA region, one of the few in the world where growth will accelerate from the 2010 pace.

However, with commodity prices, especially food product prices, set to rise, we see several linked economic risks across the region. These include the deterioration of fiscal and external balances, financing issues and a clampdown on economic and social liberties, including access by foreign investors. Maintaining expensive subsidy regimes (and adding more government spending) will be particularly detrimental to the fiscal and external positions of oil importers. Some, like Jordan, may turn to bilateral aid. Others, including Tunisia, could face significantly higher financing costs and may be forced to delay international bond issuance and turn instead to local markets, possibly crowding out private investment.

These policies are unsustainable in the medium to long term. Subsidy measures will do little to dampen inflationary pressure, especially if governments pair them with higher public-sector wages and other types of fiscal support to soothe troubled populations. Moreover, as RGE noted in the last MENA Focus, the maintenance of social spending and subsidies may curtail planned infrastructure spending. All of this makes the macroeconomic and investment climate for fuel importers more uncertain. These trends are not consistent across the region, however. We believe that investors will continue to differentiate between the stronger and weaker balance sheets in the region, with oil exporters with ample savings (including US$1.8 trillion managed by the region’s sovereign investors) and more open investment climates continuing to attract the bulk of investment.

The situation in Tunisia remains uncertain, with the new government on the verge of collapse as opposition members have pulled out. Public protests continue, calling for a completely new government. Whatever government finally emerges will need to deal with the economic grievances that triggered the unrest while recovering from the chaos of recent weeks. We assume that the developments will dampen Tunisia’s growth in the current quarter by reducing its ability to attract investment and denting its crucial tourist revenues.

The demonstrative effect of the overthrow of the ruler is clear, as events leading to Ben Ali’s ouster were watched all across the Arab world on Al-Jazeera. Self-immolation, a potent symbol that many say catalyzed events in Tunisia, has been present in Algeria, Egypt, Mauritania and Yemen in a dangerous copycat trend. Failure to respond to the underlying causes could create further issues for rulers and stymie economic development. However, in some of these countries, the combination of continued transfers, strong military presence and political restrictions including limits on voting and public assembly rights could keep the regimes in place for some time.

Source: RGE Monitor, January 19, 2011.

Tags: Arab Leaders, Arab World, Commodity Prices, Economic Risks, Employment Prospects, External Positions, Food And Fuel, Food Product, Foreign Investors, Hyper Vigilance, Lebanese Government, Mena Region, Nouriel Roubini, Political Indicators, Political Institutions, Question Marks, Social Transfers, Unity Government, Volatile Mixture, Zine El Abidine Ben Ali
Posted in Energy & Natural Resources, Infrastructure, Markets, Oil and Gas, Outlook | Comments Off

Ferguson, Roubini vs. Krugman: Slowdown or Depression for The U.S.?

Wednesday, June 30th, 2010

Paul Krugman, a strong supporter of fiat money, is obviously having a major distress over the G20 push to cut deficits in half by 2013, and stabilize the soaring U.S. debt.  In his latest New York Times column, Krugman not only criticizes austerity measures, but also asserts that we are in the early stages of a third depression as a direct result of the spending cut.

Perhaps because Krugman beat him to the punch with this ultimate Doomsday op-ed piece, on this very rare occasion, Dr. Doom–Nouriel Roubini–is actually a lot more optimistic about the economy in the United States when he spoke with CNBC last night. (watch the clip here.)

Roubini – No Recession in The U.S.

In The Kudlow Report, Roubini says he does not see a double-dip recession in the U.S.  Rather, the U.S. will experience a slowdown of around 1.5% GDP in the second half of this year, after growing 3% in the first half, he says.

At the same time, keeping up with his Dr. Doom reputation, Roubini does see a recession coming in the euro zone and Japan.  There is a risk of a contagion effect to the U.S., which could lead to further correction in stock prices with a double-dip in Europe, Japan “falling off the cliff”, and evidence of a slowdown in China.

Meeting Krugman sort of halfway, Roubini thinks fiscal austerity is needed in Greece, Spain and Portugal, whereas countries like Germany, Japan, China, should be doing fiscal stimulus.

Ferguson Worries about Europe Banks & U.S. Fiscal

Roubini’s view is also shared by Harvard University professor–Niall Ferguson–who told CNBC in a separate interview that

“Right now the picture is definitely bleaker in Europe than it is in the US….I agree with Nouriel on this, it’s not as if the US economy will contract, it will grow at a slower rate.”

In addition to the debt woes in Europe, Ferguson is “nervous” about European banks, which were more leveraged than US banks.  He noted the European governments do not have “very deep pockets” as most people have assumed, and Greek crisis revealed the limit of this largesse.

Even though compared with the euro zone, the economic picture in the U.S. does look relatively better; Ferguson said the horrendous fiscal situation means the US is likely to be faced with tough measures to cut the deficit over the longer term.

My Take - Difficult Balancing Act

Based on my biflation analysis, I believe the risk of deflation, not to mention depression, is highly overstated.  As such, I don’t see the U.S. going into another recession either, albeit slow and anemic growth into 2011 or 2012.

On the other hand, the U.S. deficit situation; however, is not something that may be rectified by more  spending as suggested by Krugman.

Bloomberg’s chart published on June 4 (below) shows the U.S. government’s total debt, which rose past $13 trillion for the first time this month, will surpass GDP in 2012, based on forecasts by the International Monetary Fund (IMF).

In a report for the Toronto summit, the IMF suggests “growth-friendly” policies such as shifting from income and payroll taxes to consumption taxes. In the United States, that might mean adopting a value-added tax (VAT) of up to 8% on all goods and services.

Tags: Austerity Measures, China, Cnbc, Contagion Effect, Debt Woes, Double Dip Recession, Dr Doom, Euro Zone, European Banks, Fiat Money, Fiscal Austerity, Fiscal Stimulus, Germany Japan, Harvard University Professor, Japan China, Kudlow, Niall Ferguson, Nouriel Roubini, Rare Occasion, S Paul, Stock Prices
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The Dow-Gold Relationship (Rosenberg)

Wednesday, June 16th, 2010

This article is a guest contribution from David Rosenberg, Chief Market Economist, Gluskin Sheff.

THE DOW-GOLD RELATIONSHIP

That is what the chart below displays … and: (i) if this ratio ends up retesting the two fundamental lows that it has achieved in the past; and, (ii) if we are correct in our assertion that gold goes to $3,000/oz, then what we would be talking about here is a Dow 5,000 trough at some point down the road.

FED ON HOLD FOR A LONG, LONG TIME

“Many predict that the economy will take years to return to full employment and that inflation will remain very low. If so, it seems likely that the Fed’s exit from the current accommodative stance of monetary policy will take a significant period of time.”

That was the conclusion from the just-published San Francisco Fed newsletter – titled The Fed’s Exit Strategy for Monetary Policy. Indeed, when you go to the rule-of-thumb that reveals statistically the relationship between the funds rate, inflation and the output gap, we estimate that the equilibrium policy rate right now is -5%. Yet it is 0.25% and we have many a Fed bank president clamouring for rate hikes. And remember, bonds do not go into bear markets unless either the Fed is tightening monetary policy or threatening to do so.

A CALL TO ARMS — PART II

A few Fridays ago, I blasted out a ‘Call to Arms’ diatribe and I apologize for ruining anybody’s weekend with it. So, I thought I would send out Part II. If truth be told, a weekend with Gary Shilling, Nouriel Roubini, Marc Faber, and Fred Hickey does one thing – it sharpens one’s wits and at a personal level it gets my wheels spinning prompting me to get more of my macro and market thoughts down on paper.

Tags: asset class, Bank President, Bear Markets, Call To Arms, Chief Market, Clamouring, Commodities, David Rosenberg, Exit Strategy, Fred Hickey, Full Employment, Gary Shilling, Global Recovery, Gluskin Sheff, Gold, Long Long Time, Lows, Marc Faber, Market Economist, Market Thoughts, Nouriel Roubini, Output Gap, Personal Level, Rate Hikes, Rule Of Thumb, Treasuries
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Is the USD Carry Trade for Real?

Thursday, December 3rd, 2009

Caroline Baum, one of Bloomberg’s most highly respected columnists, questions the veracity of Nouriel Roubini’s claim that the carry trade is inflating assets around the world.

Zero percent interest rates started it. A weak dollar fueled it. Speculators fanned it. And famed forecasters see it everywhere they look. There’s only one problem with the claims that the dollar carry trade – borrowing dollars cheaply to invest in higher-yielding assets abroad – is inflating bubbles across the globe: There is no visible credit expansion, at least in the US, to support them.

Roubini’s bubbles float on flimsy credit source, Bloomberg, December 2, 2009

Tags: Assets, Bloomberg, Bubbles, Caroline Baum, Credit Expansion, Credit Source, Forecasters, Globe, interest rates, Nouriel Roubini, Speculators, Veracity, Weak Dollar, Zero Percent
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How to save a friend from the false prophet Nouriel Roubini

Thursday, October 22nd, 2009

This is a guest contribution by Damien Hoffman, editor of the very popular Wall St Cheat Sheet blog. Make sure to add this site to your must-read list.

In August I wrote an article “Is Nouriel Roubini a false prophet?” Apparently, some people are so smitten with Roubini they actually ignored all the cited articles and said, “No”. Consequently, I teamed up with a group of people around the world on an open source project to continue our mission exposing false prophets and help unwash those well-meaning brains.

The video below is a large collection of evidence proving Roubini has an horrendous record as a prognosticator. If you too know someone who has been listening to the seductive sounds of Roubini’s mantras, send them this helpful deprogramming message.

Source: Damien Hoffman, Wall St. Cheat Sheet, September 3, 2009.

Tags: Blog, Brains, Cheat Sheet, Deprogramming, False Prophet, False Prophets, Group Of People, Hoffman, Message Source, Nouriel Roubini, Open Source Project, People Around The World, Prognosticator, Sounds, Well Meaning
Posted in Markets | 2 Comments »

Joseph Stiglitz Interview on Economic Recovery

Tuesday, October 6th, 2009

Joseph Stiglitz is interviewed by Bloomberg during a visit to Istanbul. Stiglitz believes markets are “irrationally exuberant” about the global recovery.

Bloomberg reports: His comments echo New York University Professor Nouriel Roubini’s view that “markets have gone up too much, too soon, too fast,” and billionaire George Soros, who warned yesterday that America’s economic recovery will be “very slow.”

The U.S. has lost 7.2 million jobs since the recession began in December 2007, and the unemployment rate reached a 26- year high in September, a Labor Department report last week showed. Joblessness is likely to reach 10 percent by the end of the year, according to economists surveyed by Bloomberg News last month.

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It’s “pretty clear that the situation will continue to get worse,” Stiglitz said, citing elements of the jobs report such as the number of people who can’t find a full-time job and the pace at which Americans are dropping out of the labor force.

Economic growth this year and next will “fall well short of what we need to stop unemployment from growing,” he said. The likelihood that the U.S. economy will be “out of the woods” before most of the measures in the Obama administration’s stimulus package expire in 2011 is “very small,” he added.

Source: Stiglitz Says Markets ‘Irrationally Exuberant’ About Recovery, Francine Lacqua and Jeremy Torobin, Bloomberg, October 6 2009

Tags: Billionaire, Bloomberg, Bloomberg News, Economic Growth, Economic Recovery, Economists, ETF, Full Time Job, George Soros, Global Recovery, Jeremy Torobin, Joblessness, Joseph Stiglitz, Labor Department, New York University, Nouriel Roubini, Obama, October 6, Recession, Stimulus Package, Unemployment Rate, York University Professor
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Techniques used by false prophets and charlatans

Friday, September 4th, 2009

This is a guest contribution by Damien Hoffman, editor-in-chief of the very popular Wall St Cheat Sheet blog. Make sure to put this site on your must-read list.

Nouriel Roubini and His Acolytes

Following the incredible popularity of my post “Is Nouriel Roubini a False Prophet?“, I’ve decided to do a little introductory lesson for those more interested in avoiding charlatans …

Cold Reading is a primary set of techniques employed by phony psychics and market prognosticators. When cold reading, the primary objective of the sender is to ensure that the recipient perceives the statement/prophecy to be a hit. Here are a few classic techniques used by Ms. Cleo and Nouriel Roubini:

TECHNIQUE 1. The “Rainbow Ruse”: Indicate one trait and, at times, the opposite.

For example: “The bad news out of the financial sector will continue to flow, and on the days that it does, the market will take a hit,” said Chris Johnson, chief investment officer at Johnson Research. “But select stocks will outperform the rest of the market,” he said, “particularly in technology.”

“Robert Loest, portfolio manager at Integrity Funds, said that a late December rally could depend on what the Fed does on Dec. 11.”

TECHNIQUE 2. “Barnum Statements”: General statements that fit most people (can also be combined with “Forking” – see below).

For example: “I think we’re going to have a tremendous amount of volatility and basically stay in a trading range until we get information on first-quarter earnings,” said Dan Genter, president at RNC Genter Capital Management.

TECHNIQUE 3. “Fuzzy Facts”: General broad statement likely to be right.

For example: “An end of the year run is not necessarily off the table,” said Art Hogan, chief market analyst at Jefferies & Co. He said that Wall Street still needs to work its way through a lot on the financial side. Yet, the broad selloff of recent weeks may have primed stocks for a bigger bounce back, particularly in the areas of the market that are unaffected by the credit market mess. “But there’s no question of volatility,” he said. “It’s going to be very bumpy through the end of the year.”

TECHNIQUE 4. “Good Chance Guess”: Like a Fuzzy Fact, these are guesses as to facts which are highly likely to register a hit.

For example, a psychic might say, “I see a blue car,” or “a house with number 2 in address,” or “I see a painting on the wall, it might be of somebody who has passed or somebody who is alive, I’m not sure?”

TECHNIQUE 5. “Lucky Guess” / “Forking”: A compounded guess – one that contains 2, 3, or more parts.

If one guess is a hit the recipient will typically say “wow,” even if the others were a miss. This was one of Roubini’s strategies.

For example, “7,000 is going to be a resistance area in the Dow. Otherwise, if it breaks through, resistance should become support and we are next likely to see some resistance at the 7,400 area. If it breaks through there we should see a run at 7,600 and then possibly new highs.”

A subset of this is one noted by Charles Kirk at The Kirk Report: “make so many predictions that you can later say you were right no matter what.” This is Jim Cramer’s forte and most other gurus out there.”

TECHNIQUE 6. “Push Statements”: State something wrong and keep pushing it!

For example, something like “The subprime scare is pushing stocks down and may spill over into the general economy causing recession and global slowdown.”

TECHNIQUE 7. “Russian Doll”: Statement with many possible layers of meaning. Keep working this until you get a hit.

For example, “Market participants were concerned about Wall Street which sold off sharply Monday as concerns about a weakening credit market wiped out investors’ enthusiasm about strong retails sales over the holiday weekend. For a brief period today, there was a twinge of optimism that the stock market would be able to score back-to-back gains. Reports of stronger than expected retail traffic over the Thanksgiving holiday contributed to that view. However, it wasn’t long before concerns about the financial sector (-4.1%) took hold again and knocked the market down to size.”

TECHNIQUE 8. “Peter Pan/Pollyanna”: Tell them what they want to hear.

“After years of living happily beyond their means, Americans are finally facing financial reality. A persistent rise in energy prices will mean bigger heating bills this winter and heftier tabs at the gas pump. Job growth is slowing and wage gains have been anemic. House prices are sliding, diminishing the value of the asset that’s the biggest factor in Americans’ personal wealth. Even the stock market, which has been resilient for so long in the face of eroding consumer sentiment, has begun pulling back amid signs of deep distress in the financial sector.”

TECHNIQUE 9. “Certain Predictions”: Predictions with no time frame.

“The market is very likely to make new all time highs despite the recent sell off.” This was another favorite by Roubini.

OTHER TECHNIQUES:

“SELF-FULFILLING”

For example, the psychic might say, “You will make a new start.” The market commentator might say, “The market may see new lows before turning higher and cause uncertainty among traders creating risk.”

“VAGUE PREDICTIONS”

For example, “The market is now looking toward 2008 and a slowdown, and I find it hard to believe that we can have a year-end rally. But there are some reasons to believe that Wall Street might see a typically upbeat December and an end of the year “Santa Claus” rally.” Clearly, in this case the speaker is predicting A or B and if either occurs they are right.

“UNVERIFIABLE STATEMENTS OR PREDICTIONS”

For example, ex post facto word fitting like “The pull back to resistance level provided support for the overnight rally. The Asian traders encouraged by strength in the yen decided to bid up the S&P in the night market.”

Note: These techniques should be differentiated from conditional propositions given by a speaker who tells you what action you should take if X or Y happens. For example, a extraordinary mentor should say, “If the market does X, then you should do why. However, if the market does N, then you should do M.” This way, the speaker is admitting they cannot predict the future, yet are still offering conditional propositions to take beneficial action.

This post was researched by my friend Dan who has a passionate interest in educating people about subversive rhetorical techniques. Thanks Dan!!

Source: Damien Hoffman, Wall St. Cheat Sheet, September 3, 2009.

Tags: Acolytes, Charlatans, Chief Investment Officer, Chief Market, Cold Reading, False Prophet, False Prophets, Financial Sector, Fuzzy Facts, Introductory Lesson, Jefferies, Management Technique, Market Analyst, Market Prognosticators, Ms Cleo, Nouriel Roubini, Phony Psychics, Quarter Earnings, Rnc Genter Capital Management, Selloff
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