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Throw Away The Shackles Of Your Birinyi Rulers And Be Free! Hungarian No Longer Bull; Now Just bull

Tyler Durden's picture





 

Hark - either the end is nigh, or we are about to see one of the biggest market melt-ups in history: the man who conceived, developed, and distributed the Birinyi Ruler to a Comcast financial comedy cable channel near you, and to late night comedy in financial circles everywhere, is no longer a Bull. He is merely a bull, which is the also the first word one may apply to another very appropriate word to describe his predictions from early on in the year. For those who have their ultrasound babel fish on, here it is: "The S&P 500 has been perilously close to a 20 per cent decline in recent weeks which would, by definition, terminate the bull market which began in March 2009. Given the economic circumstances and the continuing political turmoil on both sides of the Atlantic, most commentators believe it is only a matter of time before such a landmark is reached. Having been bullish, I am – as expected – disappointed but not undaunted. I remain bullish if only now with a lower case “b”. Some months ago I conceded that making market forecasts was increasingly difficult as they entailed an understanding of American politics, Chinese monetary and financial policy, Greek and Italian attitudes, German elections in addition to the usual economics, corporate developments and actions and comments by the Federal Reserve Board." Obviously, all these are superfluous 'things' that a man of Birinyi's intellect should not need to be concerned by. After all, what is good is the 'ruler' for if not to predict the future? But before you go ahead and pledge a 4th lien on your 3rd born to go all in stocks, here is the Notorious BIGGS, who bottom ticked the market a few weeks back with laser-like precision : "Barton Biggs Increases Bullish Bets in Traxis Macro Fund to 65%." Needless to say, every time Biggs has done something, the market has done the opposite. So for all those confused what they should do when two of the market's most hilarious permabulls say the opposite things, fear not - i) you are not alone, and ii) just buy a collocated vacuum tube-based algo, and watch as the High Frontrunning Trading algo makes you rich beyond your wildest dreams.

From the FT:

Still a bull, but with a lower case ‘b’, says Laszlo Birinyi

The S&P 500 has been perilously close to a 20 per cent decline in recent weeks which would, by definition, terminate the bull market which began in March 2009. Given the economic circumstances and the continuing political turmoil on both sides of the Atlantic, most commentators believe it is only a matter of time before such a landmark is reached.

Having been bullish, I am – as expected – disappointed but not undaunted. I remain bullish if only now with a lower case “b”. Some months ago I conceded that making market forecasts was increasingly difficult as they entailed an understanding of American politics, Chinese monetary and financial policy, Greek and Italian attitudes, German elections in addition to the usual economics, corporate developments and actions and comments by the Federal Reserve Board.

I contend that as much as five percentage points of the recent sharp correction has been a result of fund liquidations. It was curious that there were a number of stories regarding the sharp losses and redemptions at some significant hedge funds and at quarter’s end there was accelerated selling. I think it unlikely that declines in stocks such as Ralph Lauren, Wynn Casinos, Chipotle Mexican and other strong performers is related to corporate developments or fundamentals.

That does not, of course, mitigate the pain of seeing those and other stocks fall but going forward it suggests the pressure was more likely temporary than enduring.

I am willing to concede that the sun is shining on the other side of the fence but I continue to find the negatives only somewhat persuasive. Yes, global economies are shaky and political paralysis exists, but stock market concerns are too often based on opinion. The bears contend that corporate earnings are too high. Perhaps, but we recently calculated that analysts’ expectations for the third quarter on a company by company basis – which are down 2 per cent from three months ago – have actually been increased by 1.5 per cent for the fourth quarter. And even a casual perusal of the past finds that bears always think earnings expectations err on the side of optimism.

Thus, the bears rationalise the reality that the S&P is trading at 11 times forward earnings. I submit that many individual names are, by definition and history, attractive. IBM, for one, is trading at a discount to the market which is not the norm for declining markets.

The bearish retort has been that stocks are expensive and should be sold, using the ten year, inflation-adjusted price-to- earnings measure by academic Robert Shiller. My response is “sell what?” His measure suggests stocks are attractive in the six to eight times P/E level. But the market last ventured into that neighbourhood in the late summer of 1982. As a money manager, using this rule would have meant I missed out on the two subsequent 100 per cent plus rallies.

I am also encouraged by the chartists. Based on painful experience, I have never found them to be of value. Several months ago 1,400 was a virtual given but on September 12th and 13th no less than six technicians were suggesting much lower levels. Perhaps, but our files included a prominent article from April 26, 2010: “Technical analysts see room to roll”. The market was then in the third day of what was to be a 17 per cent decline. On July 5, 2010, that year’s S&P low, we had: “Technicians await the bear”. Buy high sell low?

There is, of course, the possibility that the bears will prevail, a double dip will occur and the market will retreat. Even then I would not follow the convention to take a defensive posture. Those who suggest that course always begin with utilities but some historical analysis undermines that idea.

Our study of market cycles found that in bad times utilities are not a panacea. During the bear market that began in late 2007 and ended in the first quarter of 2009, the S&P lost 56 per cent and utilities 46 per cent. Dividends helped some but they are usually taxed. In the 2000 decline the broad market lost 46 per cent and utilities were down 45 per cent.

I think the bearish case is short of substance, the defensive thesis suspect and that selling has been overdone. There are some attractive – if not cheap stocks available. We are reviewing and pruning weaker positions and stocks as well as being more judicious in our purchases. Being bullish on stocks is probably a step down from being bullish on the market but, as economist John Maynard Keynes once said, when things change, I change my mind. What do you do?

I don’t know how and when this will all end. One clue might be to look for significant and prominent negative reports. On March 9, 2009, at the absolute bottom, the Wall Street Journal’s Money section headlined: “Dow 5,000? A bearish possibility”.

And one of the longest market stories in last year’s New York Times – again at the absolute bottom for markets that year – was subtitled: “Wall Street tallies new losses with a bear market in mind”.

Laszlo Birinyi is the founder and president of Birinyi Associates

 


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Mon, 10/17/2011 - 13:49 | Link to Comment slaughterer
slaughterer's picture

It is going to break alot of bear's hearts when we close green today.  /sarc

Mon, 10/17/2011 - 14:15 | Link to Comment Oh regional Indian
Oh regional Indian's picture

Dark tides. 

ORI

@OWS

Mon, 10/17/2011 - 19:23 | Link to Comment Kiss My Iceland...
Kiss My Icelandic Ass's picture

I don't know why everyone is so down on Birinyi.

I *love* Birinyi. I usually get the shrimp, but it sounds like lower-case bull is worth a try ?

Mon, 10/17/2011 - 14:21 | Link to Comment kaiten
kaiten's picture

... and two months from now he´ll be neither Bull or bull, but just a fool

Mon, 10/17/2011 - 14:33 | Link to Comment Nascent_Variable
Nascent_Variable's picture

deleted

Mon, 10/17/2011 - 13:50 | Link to Comment Dick Darlington
Dick Darlington's picture

the bull market which began in March 2009

ROFFLOL. Damn u Birinyi, i need to change my diaper again.

Mon, 10/17/2011 - 14:12 | Link to Comment SheepDog-One
SheepDog-One's picture

'The bull market which began in March 2009'...

And got us all the way back up to 1999 market levels today? WOW! Now thats a BULL MARKET!!

<:D

Mon, 10/17/2011 - 14:18 | Link to Comment Unprepared
Unprepared's picture

Birnyi is as holographically-challenged as a coin tossed in a Brenouille trial.

Mon, 10/17/2011 - 14:58 | Link to Comment Variance Doc
Variance Doc's picture

It's Bernoulli trial (not Brenouille trial), that is a experiment where there is two outcomes: "success" and "failure", 0 or 1, etc.  A sequence of Bernoulli trials leads to the Binomial distribution.

Not too clear on what you mean by "holographically-challenged."

Mon, 10/17/2011 - 16:19 | Link to Comment Unprepared
Unprepared's picture

Sorry about the misspelling. The said trials are 'independent', presuming that each flip of the coin has no memory about the outcome of preceding tosses, just as Mr. Birinyi doesn't seem to have a memory of how wrong his previous calls have been.

Mon, 10/17/2011 - 13:54 | Link to Comment cranky-old-geezer
cranky-old-geezer's picture

 

 

Where's October Crash II somebody predicted for today?

Mon, 10/17/2011 - 14:08 | Link to Comment SMG
SMG's picture

Could be in the near future.  I think there's a much better chance of a crash than of a rally.

Then again I've been on the wrong side of that trade lately.

Mon, 10/17/2011 - 14:12 | Link to Comment Sabibaby
Sabibaby's picture

Just be patient, someone is about to be downgraded from AAA to aaa

 

(the second one is all in lowercase)

Mon, 10/17/2011 - 15:01 | Link to Comment tickhound
tickhound's picture

Haha... To me its not just what Birinyi says, its the pompous smug smirk he has when he says it.

Mon, 10/17/2011 - 19:51 | Link to Comment knukles
knukles's picture

Yeah, exactly.
It's almost like he's staring at you while he's fingering his prostate and thinking "I ain't got no lumps, bitch."
I know that look.

Mon, 10/17/2011 - 14:42 | Link to Comment New_Meat
New_Meat's picture

Anonymous and Wakanda got some 'splainin' to do.

OTOH, predicct early and predicct often.

- Ned

Mon, 10/17/2011 - 13:59 | Link to Comment QEsucks
QEsucks's picture

Birinyi- check Biggs-check Now I just need a Cramer to BUY BUY BUY

Mon, 10/17/2011 - 14:05 | Link to Comment wandstrasse
wandstrasse's picture

Forever long I want to be, forever long...

Mon, 10/17/2011 - 14:00 | Link to Comment Burnsy
Burnsy's picture

I'm having a hard time with the Laz. Not because he's a bull, but because I don't understand his methodology. He's not a technician. He knows very little about reliable valuation metrics, and he is certainly no macroeconomist, as his comical 'analysis' above shows. Nor is he a fundamental analyst, that much is obvious.

So pray tell, Laz: is this based on lunar cycles, tarot cards, what?

What a total quack.

Mon, 10/17/2011 - 14:04 | Link to Comment kito
kito's picture

whats there not to understand?

straight...line...up

Mon, 10/17/2011 - 14:13 | Link to Comment slaughterer
slaughterer's picture

Birinyi ruler... is always too straight ... isn't it?  Somebody needs to bend it.  

Mon, 10/17/2011 - 14:07 | Link to Comment wandstrasse
wandstrasse's picture

Nor is he a fundamental analyst

maybe he is an anal fundamentalist...

Mon, 10/17/2011 - 14:14 | Link to Comment SheepDog-One
SheepDog-One's picture

Lazlo is fundamentally an anal cyst.

Mon, 10/17/2011 - 15:20 | Link to Comment Toolshed
Toolshed's picture

Thanks a lot Sheepster, now I have Coke coming OUT of my nose!

Mon, 10/17/2011 - 16:18 | Link to Comment Smiddywesson
Smiddywesson's picture

He's an egomaniac who apes what he heard other people say, but hides it in babbling bullshit so nobody knows he's a phoney.  That's why he rambles, he NEEDS to throw you off to the fact that he does almost no analysis of his own, but he still WANTS to be admired so he behaves smugly and tries to baffle you with bullshit.

Mon, 10/17/2011 - 14:16 | Link to Comment Piranhanoia
Piranhanoia's picture

What is with all the omissions?  The statements don't mention reality, or the incontinent he lives upon.  Oh the isolation.  Think it would surprise him if he found out his shoes touched dirt if he walked outside?  Maybe he doesn't go outside?    For the ft to interview a person like this and then publish it is pretty cold.  Trying to make the man look like he is in a coma.

Mon, 10/17/2011 - 14:19 | Link to Comment SheepDog-One
SheepDog-One's picture

This guy want to go back and read historical tea leaves to find out whats going on today? Idiot.

Mon, 10/17/2011 - 14:33 | Link to Comment slewie the pi-rat
slewie the pi-rat's picture

he has a fun name, tho!

Mon, 10/17/2011 - 14:24 | Link to Comment Calc
Calc's picture

My hero.

Mon, 10/17/2011 - 14:38 | Link to Comment derek_vineyard
derek_vineyard's picture

All that matters is the Macro.  Taxes will be raised SUBSTANTIALLY at some point. Election year kicking the can to avoid it being this year.  When the bill comes due, individuals and corportions alike will be required to pay it.  And when the bill comes due to fund retirements via IRA accounts.... realization that these corporations market caps are hugely over valued will be crystal clear.

Food for thought: Corporations contribute 1% of the tax revenue to the general fund per ZH chart yesterday, but have to fund massive retirement amounts via IRA/etc obligations (perhaps 50% of non SS and pension).  Statistically this does not compute.

Fuck earnings and dividends today....its what they can maintain for the future that matters. And if you think they will fund all the boomers (and beyond) retirements, THINK AGAIN. 

Mon, 10/17/2011 - 14:43 | Link to Comment junkyardjack
junkyardjack's picture

What the hell the true precious commodity, AAPL is dropping. Obviously this market isn't based on fundamentals

Mon, 10/17/2011 - 14:59 | Link to Comment derek_vineyard
derek_vineyard's picture

Another off the wall thought:  People say they 'invested' in stocks.  Invested?  Thats not investing.  Its guessing.....hoping.

Doesn't investment require foresight, effort, knowledge and  due diligence?   I'm having a hard time verbalizing my thoughts, but things are fucked up.  When REAL yields are pegged NEGATIVE for a prolonged term ERRATIC, UNPREDITABLE  things will happen.     (Most people wont accept losing a few %/year safely (even safe is in question) and will seek out a yield even if the risk is decidely negative.)  Be wary. 

And with markets running in such coorelation---hedging is difficult.

 

Mon, 10/17/2011 - 14:55 | Link to Comment Motorhead
Motorhead's picture

Don't listen to this guy.  Just listen to the pros on CNBC.  They can sure call 'em.  Just ask Jim Cramer.

Mon, 10/17/2011 - 15:11 | Link to Comment Grand Supercycle
Grand Supercycle's picture

SP500 daily chart now gives bearish signal, warning of a new leg down. Weekly chart reverts to neutral.

http://stockmarket618.wordpress.com

Mon, 10/17/2011 - 15:20 | Link to Comment derek_vineyard
derek_vineyard's picture

Anyone who has such great advice and sells it  (rather than using it) is someone I do not care to listen to.

Mon, 10/17/2011 - 15:22 | Link to Comment Iwanttoknow
Iwanttoknow's picture

Biriyani is adelicacy ,brought from cetral asia to India.This guy is no delicacy.

Mon, 10/17/2011 - 15:48 | Link to Comment Josh Randall
Josh Randall's picture

As Snoop Dogg would say, Biriyani is a lower case "g"

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