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.

Your rating: None

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Fri, 01/03/2014 - 22:52 | 4298663 NoDebt
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.

Sat, 01/04/2014 - 09:04 | 4299448 GetZeeGold
GetZeeGold's picture



Everyone knows this is going to end badly - Jim Cramer


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

Fri, 01/03/2014 - 22:51 | 4298664 SAT 800
SAT 800's picture

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

Fri, 01/03/2014 - 23:24 | 4298731 lewy14
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. 

Fri, 01/03/2014 - 23:21 | 4298732 disabledvet
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?

Fri, 01/03/2014 - 23:35 | 4298766 FredFlintstone
FredFlintstone's picture

Gotta love that last name!

Sat, 01/04/2014 - 02:04 | 4299116 Canadian Dirtlump
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.

Sat, 01/04/2014 - 00:56 | 4298961 Tegrat
Tegrat's picture

FCEL Rocks. Coming to you in 2050...


Sat, 01/04/2014 - 09:51 | 4299508 Papasmurf
Papasmurf's picture

FCEL: a Cramer pick of the litter.

Sat, 01/04/2014 - 01:18 | 4299005 SillySalesmanQu...
SillySalesmanQuestion's picture

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

Sat, 01/04/2014 - 01:46 | 4299077 holdbuysell
holdbuysell's picture

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

A nearly 1:1 correlation.

Sat, 01/04/2014 - 02:32 | 4299174 Ass to Mouth
Ass to Mouth's picture

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

Sat, 01/04/2014 - 06:21 | 4299322 Zero Point
Zero Point's picture

Sneak into a Bohemian Grove "cookout".

Sat, 01/04/2014 - 09:55 | 4299511 Papasmurf
Papasmurf's picture

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


Sat, 01/04/2014 - 09:00 | 4299445 Bangin7GramRocks
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.

Sat, 01/04/2014 - 03:05 | 4299208 icanhasbailout
icanhasbailout's picture

it's a nose pickers' market

Sat, 01/04/2014 - 04:41 | 4299281 lewy14
lewy14's picture



Sat, 01/04/2014 - 11:09 | 4299611 NIHILIST CIPHER

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

Sat, 01/04/2014 - 11:15 | 4299630 NIHILIST CIPHER

 Slim Pickins

Sat, 01/04/2014 - 14:45 | 4300012 HUGE_Gamma
HUGE_Gamma's picture

there will always be a hype momo stock

Do NOT follow this link or you will be banned from the site!