Dr.
Stool is curious about just how bad are some of these people, who are running, and
advising, your retirement fund managers.
After all, we are entrusting these used car salesmen with trillions in
our hard earned money, and putting it in their hands for
safekeeping.
A
big part of stock proctology is the examination of Wall Street analyst
prognostications, pronouncements, and pontifications. Dr. Stool knows
that amidst all the bull, there is a kernel of truth. However, the
essence of Stock Proctology is that what passes for truth in the parallel
universe of Wall Street is, in fact, usually the opposite of truth.
For that reason, one of the stock proctologist's most important tools,
aside from the stock proctoscope, is the Wall Street Crap Detector.
Ferreting
out the morsels of truth amid all the Wall Street crud is a
most unpleasant job. It's kind of like that scene in that dinosaur
movie...what the hell was the name of that movie?...anyway, it's kind
of like the scene where the nice lady dinosaur scientist sticks here
arm deep into that enormous pile of dinosaur shit, to pull out the
cause of the poor dinosaur's distress.
It's
like that for Dr. Stool, disgusting, but when he does find the truth,
quite rewarding.
Listening
to the Mother Joseph Superior AJ Miss The Turn I Don't Follow The
Nasdaq S&P 1650 is kind of like that. She is stern
faced, monotonic and calm, and she speaks in the first person plural
at all times, the imperial or papal we. As impressive as that is on
the surface, Dr. Stool keeps getting
this feeling that something isn't quite right with what the Mother has
been saying. This, in terms of stock proctology, is known as the
colonic reaction. The colonic reaction is that feeling you get when
you suspect you're being lied to. There's just that hint of shakiness
in the lower GI. You know, the "I did not have sex with that
woman!" feeling.
So Dr. Stool took it upon himself to do a little research into
the public pronouncements of the Mother Joseph Superior, the most famous and powerful
market strategist and Mother Superior in the world.
Here's
what he found. First, she talks a lot. Dr. Stool found 30 different
dates in the past 15 months where her remarks we're publicly recorded.
Second, she makes a hell of a lot of predictions. Some are even right
on occasion, but she is wrong far more than she is right. Third, she is
very consistent in her wrongness. She is rigidly locked into her
position, and is determined to keep heading in the same direction
until, ahem, the market catches up with her and gets it right.
However, her market predictions are wrong because she gets the
underlying economic analysis wrong, as you'll see.
Another
thing Dr. Stool discovered is that she has a self-serving way of
shading her statements so as not to call attention to her horrendous
record, while at the same time dropping subtle reminders of the few
things she was right about. She also twists the record to
make it appear that she was right, while being dead wrong. She would
have been correct in thinking that no one would
notice, until Dr. Stool came along.
Alas,
we can't ignore the bottom line. Not only is she a lousy analyst.
She's a self-serving spinner, who never ever takes
responsibility
for being wrong. It's the market who gets it wrong, investors who get
it wrong. And it's only a matter of time until they catch up with her
infallible rightness. She must have taken lessons from that lying crooked
sonofabitch ex-President of ours. (Did Wall Street took notice that his
sociopathic narcissism actually pays, or perhaps he took his cue from
Wall Street?)
Dr.
Stool also noticed, and we all know this, that the Mother's pronouncements
move markets, for a minute or two, usually in a countertrend
direction. This creates opportunity for profit. Typically, when the
Mother opens her smug mouth, you would do well to immediately do the
opposite of what she says, if what she says is countertrend. When
she's in synch with the trend, just ignore her.
So
here, stool seekers, is the record of public pronouncements by the
Mother Joseph Superior over the last five quarters. Keep in mind that
Goldman Sachs forecasts a six to twelve month horizon.
Let's
start with the most recent event. On March 7, the Mother dropped her
infamous smelly turd, increasing her recommended portfolio
weighting from 65% to 70% stock, and reducing tech to 32% from 35%.
The market gave her the Whoopee cushion by going straight to hell
within an hour after she goosed it in the morning, but only history
will be the judge of this call.
But
looky here. She was also quoted that, paraphrasing:
The
call made a year ago on technology was right on, says Cohen; at the
time they made it, the actual weighting in the S&P for tech and
telecom combined was 45% - Goldman had advised 35%. Cohen had
expressed concern for not only the high quality companies in the
S&P, but also the lower quality companies - much of the price
damage has occurred in secondary and tertiary, and younger and
unseasoned companies. Today, the actual S&P weighting is a
little below 30%; Goldman would be a little above that - for
the first time in a year-and-a-half, they are overweight in tech.
What
a self serving load of horseshit. Let's look at the record. First of
all, Dr. Stool has no idea what the actual tech weight in the S&P
is, but he has read it's closer to 20% than 30%. (Stoolseekers, help
Dr. Stool on this.) And the idea that this is the first time
that she recommended investors overweight tech is nonsense. As the
tech stocks have collapsed, an investor would have had to add
continually to their positions in tech, just to keep up with the 35%
weighting.
And
AJ, Miss The Turn, lost no opportunity to encourage continued buying
in tech. Over the period from February 2000 to January 2001, she
either made positive public comments on tech, reaffirmed a 35% weighting,
or made outright recommendations, no fewer than ten times. Here they
are, along with where the Goldman
Sachs Technology Composite was at each of those pronouncements.
$GTC.X
February
15, 2000
478.81
March
22, 2000
561.60
March
28, 2000
563.21
April
14, 2000
408.28
June
24, 2000
477.47
July
7, 2000
482.77
July
19, 2000
493.13
September
14, 2000
476.38
November
27, 2000
333.08
January
29, 2001
338.82
The
table shows the closing price of
the $GTC.X on the date of the pronouncement. As of March 9, 2001, when
this was written, the index was 229.29 If you had gone in and bought
tech on the morning of March 7, gee you'd only be down 10.5%. But
then, there's nothing like doubling down, and doubling down, and
doubling down.
On
March 22, 2000, while reducing tech weighting to 35%, the Mother emphasized
that she was not at all bearish on tech, which is called
speaking with forked tongue. She followed up that statement on April
9th, a week or so after the first big crack in tech, with a
statement that Goldman was not recommending tech. On June 24 she said
that tech was in good shape fundamentally. She added that the
good tech-telecom penetration into foreign markets would be good for
earnings. On July 19, 2000 she reiterated that tech will do well
fundamentally. Remember now, Goldman's forecast horizon is six to
twelve months.
On
November 27, 2000, while forecasting, again that the S&P
would reach 1575 by the end of the year (it was at 1349 at the time),
she specifically recommended data storage, networking and intranet
infrastructures along with a list of stocks. So let's see where that
group was then and now.
On
December 2 2000 she said that financials and tech would drive the
market higher. Then on January 29 of this year she recommended
overweighting tech.
The
January 29, 2001 recommendation is notable because she specifically
recommended tech overweighting. So as to whether the March 7
pontification was the first time she recommended overweighting in
tech, as she said that day, you be the judge. Furthermore, with
the constant decline in tech prices, you'd have to keep buying just to
keep up with that 35% weighting. Whether they actually said to
overweight is irrelevant. The policy required overweighting
Now
let's look at the market call record. Dr. Stool went back to the
beginning of 2000. On January 2, Miss The Turn Mother Joseph made her
first published pontification of last year. She made a year end
forecast of Dow 12,300, S&P 1525, and here's one no one remembers,
the T-Bond would be at 6.7%. The S&P closed at 1321, only 13%
below her forecast. She did better on the Dow. It closed at 10,803,
down only 12.2%. The T-Bond closed the year at 5.46%. She missed that
by 18%. In every case she was wrong about the direction.
What's
worse is that she stuck with those numbers month after month after
month, even raising her S&P target to 1575 on March 21, and her
Dow target to 12,600 on April 9th. She raised her 12 month rolling
S&P target to 1625 on May 16, and 1650 on September 13. But
investors, wisely, weren't buying it. Then, in the face of obvious, persistent
deterioration, she made that preposterous prediction on November 27
when she again forecast that year end target of 1575, a gain of 14% in
a month. But perhaps she took the pipe, or lost her marbles
completely, back on May 16th, when she proclaimed that using PE
ratios leads to incorrect conclusions.
As
for interest rates.. .just as bad. Not only was she way wide of the
mark on the T-bond, she predicted repeatedly that the Fed would raise
rates throughout most of 2000, until finally, on November 14, she
finally said that a Fed rate hike was less likely. On December
2, she said that the Fed would not cut rates. This was four weeks
before the Fed dropped its rate cut bomb. Not once is there any
indication in the press that the Mother forecast a rate cut.
Throughout
the year 2000, she repeatedly forecast no recession, and GDP growth
slowing to the 3-4% range. She repeated her forecast of good earnings
growth several times. (Reminder stool fans- 6-12 month forecast) In
July she forecast 18% profit growth, in September 10%. Apparently,
some trends she can follow, a little late, but at least she follows.
On December 30 she lowered her GDP growth forecast to 2.5% to 3%, and
then cut that to 2-3%,this January 13.
Now
stoolseekers, just how does 2-3% GDP growth translate into a 34%
increase in stock prices. Yes you got it! Stocks are undervalued
because PE ratios lead to the WRONG CONCLUSIONS.
Now
Dr. Stool wants to be fair. It's hard, but he'll try. The fact is that
Miss The Turn did make lots and lots of other recommendations. Some of
them were even right! As Dr. Stool's father says, "Son, throw
enough shit agin' the barn door, and sure as hell, some of it'll
stick!"
So
here's a more complete picture. No more bashing. Following is a table
of the performance of the Mother's recommended stocks and groups from
early 2000.
Way
to go Mother! But alas, the list doesn't include the impact of that
35% tech weighting. So here's another table showing recommended group
performance.
Small
cap (WSX.X)
828.96
720.92
-13.0%
REIT
283.34
340.9
20.3%
Financials
30.5
39.19
28.5%
Chemicals
425.13
446
4.9%
Natural
Gas
140.57
266.62
89.7%
35%
Tech
428.4
229.29
-46.5%
Assuming
that was the entire portfolio, with tech at 35% and the other groups
65%, the weighted average result is a net gain of 0.68%.
Not bad considering! But again, in order to keep up that 35% tech
weighting, you would have had to keep selling your winners, and buying
more and more of the ever depreciating tech sector, a strategy which
would have resulted in ever greater losses. So much for portfolio
theory, another bunch of crap, along with the "buy good
stocks and hold 'em" shibboleth.
Last
but not least (Are you still there? Congratulations) here's the most
recent bag o'bones, the rest of Miss The Turns recommendations from
last November 27, 2000. The table of the real carnage is up above.
Here's the rest of the pile.
The
net effect of the little wieners and losers here, combined with the
debacle of the tech recommendations above, is a loss of -17.5%. But,
out of 16 picks, there are seven wieners!
Give
it time racing fans. The Bear will get to all of 'em. He's gonna have
ole AJ Miss The Turn's little wieners on a bun, with mustard, kraut,
relish, pickles, and onions. And they're comin' out smelly at t'other
end!
