Joe Battipaglia

Top 144. Apr 2, 2001 3:08 PM

» Roger_Babson - Re: Re: Joe and bullrun in the news

In response to message posted by DennisL:

Joe "Bet-he'll-gag-ya" has to be the perma-bull poster boy, and one who has gotten it about as wrong as one can get it. He was recommending CSCO in the $40s-$50s and INTC in the $40s not long ago, seemingly utterly oblivious to what was happening in the economy.

The guy is nothing more than a shill, a fact to which fortunately more people seem to be waking up.

-- posted by Roger_Babson

Top 145. Apr 2, 2001 4:20 PM

» DennisL - Re: Re: Re: Joe and bullrun in the news

In response to message posted by Roger_Babson:

Roger,

You are correct about Joe B. being the permabulls' poster boy. However, as much as Joe B. is the permabulls' poster boy, I see you as the permabears' poster boy.

I don't mean that to be a criticism of or a knock on you. I read your posts (at the least the ones that are not too long!) for intellectual stimulus and entertainment, but I don't take your extremely bearish opinions any more seriously than Joe B.'s extremely bullish opinions. To me, both extremes are just a lot of noise.

Keep posting, though. I enjoy your musings.

-- posted by DennisL

Top 146. Apr 2, 2001 5:18 PM

» Roger_Babson - Re: Re: Re: Re: Joe and bullrun in the news

In response to message posted by DennisL:

Dennis, your assessment of me as a permabear is way off target. I was bullish (and was handsomely rewarded for being so, BTW) until 1998 when I turned bearish in the summer/fall of 1998, which was the peak of the broad market's 16-year secular bull market and the beginning of the secular bear market that is only now being confirmed with the bursting of the dot-bomb bubble and the emerging profit-starved environment for stocks.

No, sir, I am not a permabear. I will be more bullish than most people are bearish when the time comes, I assure you; but that time is not yet here.

One misconception permabulls have is that they think that a bear is someone who doesn't believe in human beings, or capitalism, or mom and apple pie, or some such drivel. Smart bears are latent bulls because, if they are correct, then they are in cash and stand to easily outperform their permabull critics from secular bull market peak highs.

This, I suspect, is why vocal bears are so reviled by bubbleheads, "helpers" (as Mr. Buffet refers to financial advisors, money managers, etc.), and Wealth Street shills and cheerleaders.

Bears during manias and bulls during gut-wrenching bear markets are hard to find but easy to disparage. But the smart, successful ones are the quintessential individuals because they so often stand apart (or nearly so) from the "revolting masses" (a reference to Ortega y Gasset's work, which you might find enlightening), which by definition makes them the opposite of the mediocre "mass man".

Thus, Dennis, it is important to understand that, over the history of the stock market, the vast majority of investors or "savers-turned-unwitting-speculators" LOSE MONEY investing in stocks, which indicates that a necessary and sufficient condition for the market to produce a long-term return superior to all other asset classes is for the mass man to discover stocks precisely at the wrong time every time, the result of which is a secular bear market and mass transfer of capital/future returns to capital from the masses to the capitalist class. History is both unambiguous and unforgiving in this regard for the mass man.

Simply put, the rewards to risk capital go to those with the most risk capital and those who can afford to risk capital, namely, "capitalists" and not wage laborers. Period. End of story. Just the way it is.

Any other perception is an empty Horatio-Alger-like working-class fantasy. That I assert this capitalist axiom disturbs many bubbleheads, I'm sure. But it is best that workers seek their fair compensation via wages, organization of their peers, petitioning the government for protective legislation, etc., and not delude themselves into believing that the Wealth Street sharks can get their justice for them via the stock market and the twice- or thrice-removed savings vehicles, such as 401Ks or IRAs. Pathetic, I tell ya.

-- posted by Roger_Babson

Top 147. Apr 2, 2001 6:42 PM

» Rande - Guess who? (Clue:

Guess who? (Clue: It ain't Joe.)

October 15, 1998

As I have stated numerous times in the past, we are entering a secular DEFLATIONARY period during which time lower rates are a RESULT of the maturation in the carrying capacity of debt in the global economy, declining creditworthiness, the resulting debt liquidation, and the disappearance of liquidity around the world.

October 23, 1998

The market's performance of the past three weeks has been nothing short of mass delusion and popular madness.

October 27, 1998

Small stocks are about to end their speculative rally and resume their bearish performance.

The probability of deflationary recession in the first half of 1999 is now 70%-80%, by my assessment.

October 28, 1998

My professional experience includes intimate knowledge of the functioning of the Wall Street fleecing racket. Most so called investors who have recently entered Wall Street's barn will eventually be shorn of their sacrificial lamb's fleece, so to speak.

October 29, 1998

The bear market rally in the major indices is complete. The small caps will soon resume their crash, as will the other indices.

Can you trust this guy?

November 4, 1998

After being bullish from late 1980, I began exiting the markets from a 65% equity position beginning in late 1996.

April 2, 2000

Your assessment of me as a permabear is way off target. I was bullish (and was handsomely rewarded for being so, BTW) until 1998 when I turned bearish in the summer/fall of 1998...

-- posted by Rande

Top 148. Apr 6, 2001 8:56 AM

» Kirk - Still Bullish

Just reported on CNBC

Joe says we are midway in the 2nd round of a earnings warning cycle. He says that historically the S&P500 has been 34% higher a year later!

Says he expects a 50bpt Fed Cut at the May meeting

says that the S&P500 is historically 12% higher after the first fed rate cut and that was 3 months ago.

CNBC commentator said "I wonder what he is smoking"...

This is good! They used to make a big deal out of Joe B, now they give him similar status to the failed Bears that they would occasionally bring out a year ago to provide "balanced reporting" though it was clear that they were not impressed with the bears a year ago, they are NOW not impressed with the bulls for not calling the market top. That is why they are TV reporters and not retired investors... 8)

-- posted by Kirk

Top 149. Apr 6, 2001 9:38 AM

» morrisgara - Re: Guess who? (Clue:

In response to message posted by Rande:

Can you trust this guy?
Ans. Yes. Given the difficulties of market timing I'd prefer to rely on someone who sounds the alarms early rather than late or not at all.
I'd rather preserve capital, even if to do so misses the gains of the final madness.
J

-- posted by morrisgara

Top 150. Apr 6, 2001 9:45 AM

» Rande - Re: Re: Guess who? (Clue:

In response to message posted by morrisgara:

Is there such a thing as too early? Would you be glad to have missed the entire once-in-a-lifetime 1990s bull market just so you could avoid the inevitable downturn?

BTW -- Issue of trust has do with conflicting statements, such as claiming to have not turned bearish until late 1998 vs. 1996.

-- posted by Rande

Top 151. Apr 6, 2001 4:34 PM

» Roger_Babson - Re: Re: Re: Guess who? (Clue:

In response to message posted by Rande:

I was not "bearish" in 1996. I was "not bullish" either but not yet bearish due to lack of confirmation of the secular top, which is an important distinction.

I turned bearish in 1998 when market cap as a percentage of GDP reached and surpassed the 1989 Nikkei level of ~130% AND the broad market peaked and began to decline, as occurred in March-April 1928 and in Japan following the global 1987 Crash.

There was plenty of warning ahead of the secular bull market coming to a crashing end, but only a handful of people knew what to look for to confirm the end, whereas most people were looking for permanent prosperity and in a few years or more Dow 36,000, 45,000, or 100,000, take your pick.

I sold in 1996 to reduce an overweighting in stocks that had occurred from the massive run-up from 1987-91. (Didn't I just recently write this somewhere?) I sold in 1998-2000 as part of a strategy of averaging "out and up". When the time comes to become bullish again, I will average "in and down" but mostly, I hope, average "at or near the absolute secular" bottom, as I did at the top.

Knowing perfectly well that "no one" can catch the absolute top (or bottom), I gave myself time to average out after outsized gains (and sizeable stock options proceeds).

Understanding the cycle allows one to be successful with this technique. Whether one refers to this as "timing the market", I don't care, as it doesn't matter to me what one calls it. The technique has worked wonderfully for me, and I expect that it will work well when the time comes to become bullish and add cash to long positions in ~2003-04 and again in ~2011-13 (after again reducing stock exposure in ~2007-09, which will again be "early", no doubt).

The people who can't time the market are fond of saying that one "can't time the market". They are correct for themselves and most others. But those who know this to be wrong and who successfully optimize returns by studying and acting on the cyclical/secular trends don't spend much time telling people about how to do it, which is one reason why only a handful of people enjoy optimal returns from the market. Most people over time "lose" money or underperform while invested in stocks. Even if people were made aware of this fact, I doubt that they would be dissuaded from stocks during the terminal phase of a secular bull market. Mass social-psychological forces dictate that such a phenomenon prevails.

Simply put, the public always discovers an investment class too late, piles in, causes prices to wildly diverge from fundamentals, and then holds on to the bloody end before discovering the next asset class that becomes "the only place to put one's money".

Capitalism is not egalitarian, nor is it democratic. During long booms, people come to think of the market as not a zero-sum endeavor, which, unfortunately, they come to learn too late that this is NOT TRUE.

Capitalism, via the common stock market is, has always been, and will always be (as long as capitalism in its current form exists) the primary mechanism by which the top 1%-5% of households measured by net wealth realizes (lawfully) the majority value of the surplus of the economy's liquid wealth (today's value of discounted future earnings from corporations) and further concentrates the surplus to itself and its progeny. Very much like feudalism and imperialism, today's version of rentier finance capitalism exists not to reward the many but to enrich the few. So far, the system can be argued to be the best there is, in spite of its seemingly fatal, self-defeating flaw. I am not an ideologue, I am a capitalist (Socialist, Republican, Social-Democrat, Fascist, monarchist, it doesn't matter to me), therefore, I seek to benefit from the system as it allows. Most people will not, and thus they will be forever relegated to tax, wage, and debt slavery, the worst of which will culminate in a revolution/reformation of some kind, after which a new regime will emerge only to again establish a very similar system except with a different name and set of values and rules.

-- posted by Roger_Babson

Top 152. Apr 10, 2001 7:32 AM

» Kirk - 4/9/01 Weekly Perspective

[From http://www.gruntal.com/research/commenta... Go read it to see his charts...

Joe has a GREAT chart showing the S&P return 12 months after the first rate cut and does one better with valuations relative to Earnings Yields

Note that Joe mentions "earnings yield" that I just discussed here: http://www.suite101.com/discussion.cfm/i...

Also note the more realistic NASDAQ target of 3000.

Weekly Perspective

With today’s poor earnings outlook, the Fed easing rates, and with bonds continuing to
outperform equities, we looked to similar points in history to get a sense of what may come.
Twenty years of history on S&P 500 earnings expectations 1 , stock prices and interest rates
provided a useful set of data to examine the markets response to changing earnings, monetary
policy and relative valuations between stocks and bonds. In short, the results favor today’s
bullish case for equities.
Downward Earnings Revisions and Stock Prices
Since October, investors have withstood a torrent of downward earnings revisions. These
downward revisions will likely continue through the second and third quarters. In light of this, I
am reducing my full year, 2001 S&P 500 operating earnings estimate to $55. Keep in mind,
however, history has shown that the equity market anticipates recovery and moves higher well
before the last of the earnings cuts. We have identified three periods similar to today where
there has been sustained, downward pressure on forecasted S&P earnings. These periods
include ‘81-82, ‘84-86, ‘89-91. In each case, the S&P 500 reversed course and moved
meaningfully higher starting about half way through the cycle of downward revisions (Table 1).
Since we are already six months into the process I believe we are at a similar inflection point
today. The 6-month return following such a market turn ranged from of +28 (in 1990) to +44%
(in 1982). The average 6-month S&P return was +34% (Table 2)

The Fed and Stock Prices

The historical relationship between Fed easing and stock price performance is also compelling.
Following the last eight credit easing cycles, the market generated positive 12-month returns
following the first rate cut in each and every case. Returns ranged from 9% (1987) to 36%
(1986). The average 12-month return for the S&P 500 was +21% (Table 3). With inflation
headed lower, the Federal Reserve should have plenty of room to add additional liquidity. I
believe that an additional 50 basis point rate cut is in store at the May 21 st FOMC meeting and
should help turn recovery into a sustained expansion.

Relative Valuations

The compression of equity multiples in the face of falling bond yields also has positive
implications for today’s equity market. Today, the forward earnings yield on the S&P 500 is
5.1% and is higher than the yield on the ten-year government bond. Since early last year, the
earnings yield for stocks has risen by 260 basis points versus the ten-year treasury yield. This degree of reevaluation compares favorably to the recession of the early 1980’s, the 1987
correction, the 1990-1991 recession, the 94-95 credit tightening, and the Asian Financial Crisis
of 1997-1998. Much like today, this process took, on average, a little over a year to complete.
Once complete, however, the S&P performed well. The average 9-month return for the S&P
following the examples mentioned was +27% (Table 4).

Recent data on consumer spending, confidence and production reveal an economy doing better
than most forecasters had expected. Last week’s labor report showing a decline in non-farm
payrolls of 86,000 jobs reflects the expected contraction of manufacturing, as well as a fall off
in temporary help hiring and does not indicate a new direction for the economy. In recent days,
existing home sales, auto sales, consumer confidence, and the National Association of
Purchasing Manufacturing survey have all exceeded forecasted levels. On the supply side,
inventories continue to be drawn down rapidly at the same time lower interest rates are giving a
needed boost to overall consumption. Since monetary policy works with a lag, I believe
consumption will accelerate with each passing quarter and lead us to a 3% run rate on GDP
growth by Q4.

Therefore, we are reaffirming our Dow and S&P targets of 12,700 on the Dow 30 and 1,650 on
the S&P 500 and establishing a new target of 3,000 on the NASDAQ composite by year-end
2001.

-- posted by Kirk