Cliff Asness Blasts Those Who Call It "A Stock Picker's Market"

Tyler Durden's picture

Cliff Asness would politely request people stop saying "It's a stock picker's market." While pairwise correlations have dropped to post-crisis lows, they remain elevated to 'normal' levels but, as Asness rages, perhaps asset managers who rely on this 'weak' phrase should more honestly note "I think they mean, "We will have to pick stocks now because the market isn’t making us money the easy way."



One of Cliff Asness' Pet Peeves...

I don’t know what it means to say, “It’s a stock picker’s market.”

It may mean the whole market isn’t going straight up now so you have to make your money picking the right stocks, but I don’t understand why active managers would suddenly get better at stock picking at those times. Note that I do think a valid use of this concept may occur when, after adjusting for market moves, there is not a lot of dispersion in stock returns, meaning that individual stocks tend to move in lockstep, leaving little idiosyncratic volatility — a necessary (but not sufficient!) ingredient to generate outperformance (assuming one is unwilling to lever up smaller differences at these times). But that’s a quant measure, and I don’t think that’s what many people mean by this comment.

I think they mean, “We will have to pick stocks now because the market isn’t making us money the easy way.” To the extent I’m wrong, I withdraw the peeve (is there a specific form I need to file for that?).

Similarly, you often hear financial professionals say such things as “forecasting market direction from here is exceptionally difficult” in a tone conveying “gee, this is really strange.” Well, I think forecasting the market over short-term horizons is always exceptionally difficult.

If they said, “Our market-timing forecasts are mostly useless most of the time, but right now, they are completely useless,” I suppose I’d be OK with it, but I’m not holding my breath that they will.

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NoDebt's picture

"Stock-picker's market" defined:  The total crap stops going up faster than the boring stuff.  Sure, it may all still go up, but going long the "most shorted" stocks may not outperform any more.  Later, it becomes a "no-pickers" market when everything goes down.

GetZeeGold's picture



Everyone knows this is going to end badly - Jim Cramer


Who says Jim doesn't have his rare moments of sanity?

SAT 800's picture

I'm willing to call it a "Fools Market"; and just let it go at that.

lewy14's picture

Asness is recycling a theme from a recent column by John Authers at the FT.


Yes, you need all three - high vol, high dispersion, and low correlation - to get a chance to beat the market with your awesome security selection.

But notably, periods of high dispersion and high volatility also coincide with high correlation.

And, like now, low correlation correlates (ahem) with low vol and low disp.

So it appears that stock pickers need "goldi-locks" conditions to maximize their advantage. Perhaps some combined indicator would be helpful. 

disabledvet's picture

basis traders, bullion banks...give me a break. a single fuel cell company went up 50% on the first day of trading this year. their product has been running off the assembly line for well over a decade now and according the head of operations "demand has soared." ballard power, fuel cell systems, quantam fuels--these businesses are making a product that has been around since the 1800's. there just wasn't a natural gas distribution system and a "fracking boom" to drop the price to damn near zero turning the battery into your engine. and now the "demand "is to regulate the pipelines 18 feet or lower "or we'll sue you into oblivion"? they'll just put it on ships instead. "Jones Act qualified ships" apparently. how does one sue the law again?

FredFlintstone's picture

Gotta love that last name!

Canadian Dirtlump's picture

that was my take away. Assness sums up about every market, the quality of the msm analysis we get, and the pedigree of the average gum chewing fartface loosely defined as our western peers.

Tegrat's picture

FCEL Rocks. Coming to you in 2050...


Papasmurf's picture

FCEL: a Cramer pick of the litter.

SillySalesmanQuestion's picture

It is a POMO, HFT, manipulated, zero interest, free money market.

holdbuysell's picture

Just look at the S&P trendline vs. the Fed's balance sheet and act accordingly.

A nearly 1:1 correlation.

Ass to Mouth's picture

I'd like to know who these stock pickers are.

Zero Point's picture

Sneak into a Bohemian Grove "cookout".

Papasmurf's picture

I think you have to be naked to go in, but I support your effort.  Take one for the team.


Bangin7GramRocks's picture

Degenerate gambler assholes with fancy titles on a business card that don't quite fucking get it yet. There is no market! It is all controlled and manipulated! But go ahead, keep thinking your "skills" are amazing. It's adorable.

icanhasbailout's picture

it's a nose pickers' market


You can pick your friends and you can pick your nose ......but you can't pick your friend's nose.                                                                                                                                                                                                                                                         @icahnhasbailout

HUGE_Gamma's picture

there will always be a hype momo stock