Elaine Garzarelli
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» SteveT - Guru Garzarelli Back as Market Timer
http://biz.yahoo.com/rb/030223/column_pr... Reuters
Guru Garzarelli Back as Market Timer
Sunday February 23, 3:47 pm ET
By Haitham Haddadin
NEW YORK (Reuters) - The flamboyant Elaine Garzarelli was high priestess of the world of high finance in the early 1990s. But these days, the Wall Street sage, whose stellar record includes predicting the 1987 stocks crash, finds her calling in the tough art of market timing.
"I don't know if it's my comeback, but it's market timing's comeback," says Garzarelli, who believes the "buy and hold" mantra of the 1990s is not suitable for the current turbulent market.
An independent researcher, she heads her own firm Garzarelli Capital Inc. As a quantitative analyst, her sector recommendations are based on a mathematical model that uses 14 indicators to track interest rates, the overall economy, profits, monetary gauges, valuations and investor sentiment.
At a recent conference in New York, the impeccably dressed Garzarelli looked the antithesis of a numbers-crunching economist nerd.
At the height of her fame, Garzarelli was dubbed the "Queen of Wall Street" and, along with other successful women, participated in a L'eggs pantyhose commercial.
The $25,000 she was paid for the spot, went into a scholarship fund for women she had set up at her alma mater, Drexel University, where she earned a doctorate in economics.
"Those who did not see it had rumors going around I was in my underwear," she joked. "I did it because Alan Greenspan (News) did a commercial for Apple Computer. It was for a good cause."
A STAR IS BORN
Garzarelli gained fame while an analyst at Shearson by predicting Black Monday in 1987. She later joined Lehman Brothers where she reportedly made $2 million a year, but was let go in 1994 over a disagreement with the chief strategist over a call. Garzarelli turned out to be right.
In 1995, she set up her own money management and advisory firm in Boca Raton, Florida, and since 1998, has worked out of an office in Huntington, Long Island in New York.
Garzarelli advises clients with over $1 billion under management in the United States, Europe and Japan, on meandering the deepest bear market this side of the Great Depression. Her institutional report goes to clients managing over $100 million.
"Her batting average is very good," said Monica Graham, president of Graham Partners Hedge Fund, which manages $150 million and is one of Garzarelli's clients.
"Her indicators take the emotion out of looking at the market ... It's a reality check. They tell you where the market should be and where it would have traded historically."
Garzarelli says to expect a flat long-term trend. Rallies may intersperse this dull market. Now is not one of those times.
"The market cannot rally until the uncertainty of North Korea and Iraq is lifted," Garzarelli told Reuters. "We could break below the October (five-year) lows. It is not because the fundamentals are that bad, but because the psychology is bad."
"The fear can create a problem with consumers, so we could be faced by a double dip in the economy," she added.
In late October, as the market recovered, she demonstrated her timing skills by recommending stocks that rallied briefly. They included Ford Motor (NYSE:F - News) and SBC Communications (NYSE:SBC - News).
She had a prescient call with utilities she upgraded to neutral from unattractive, saying they were cheap. Among those, Dominion Resources (NYSE:D - News) rose to $56 from $41.
Now, she says she likes retail, insurance and restaurants, among others, while avoiding metals, beverages and utilities.
MEDICINE TO ECONOMICS
Garzarelli's career on Wall Street has roots in her family life. She set out to study medicine, but after taking a course in economics, was instantly hooked.
"My Dad was a banker and was astute in the stock market," said Garzarelli, who while growing up was fiercely competitive with her older brother, now an engineer. "I learned a lot about math, electronics and science from him... also chess."
At Shearson, she warned investors to stay out of stocks. On Black Monday, Oct. 19, 1987, the Dow plunged 508 points, or more than 22 percent, -- and a star was born.
"I went on TV," Garzarelli recalls. "It made me famous to the general public ... I was the new flavor of ice cream."
On the Street, though, she had already been chosen for seven years as the top pick in Institutional Investor magazine's All America Research First Team in quantitative analysis. She held on to the No. 1 spot for 11 consecutive years.
Detractors have argued that Garzarelli gets a lot of mileage from that 1987 call, but got other calls wrong. A big blunder, they say, was turning bearish in 1996 amid the biggest bull run in U.S. history.
"It destroyed my reputation. I had such a following," said Garzarelli, who turned bullish soon afterward. "Greenspan spoke about 'Irrational Exuberance' and he was trashed too."
Her other more prescient calls included the 1990 and 2000 bear markets, the market bottom in 1982 and top in 1984.
Though her attempts at managing a mutual fund at Shearson were not that stellar, she fared better in picking market sectors for the Forward family of funds between 2000 and 2002.
Unbiased advice is where she excels, clients say.
"There was a time when Elaine was running money and was tied up with the emotions involved," says Lou Lloyd, president of the $20 million Belfinance Hedge Fund.
When he was in charge of global equities at Shearson, Lloyd hired Garzarelli, and calls her track record "impeccable." Now, as a client, he says her advice can prompt him to take "another look" at a stock.
For Garzarelli, life on male-dominated Wall Street was challenging. It also got progressively tougher.
"As you get closer to the men in age, things do not work as well. They can't guide you, it's competitive," she says.
-- posted by SteveT
» SteveT - Re: Re: NBR tonight
In response to message posted by reynosa:I too missed the show, but thanks to the good folks at NBR they do offer transcripts at their web site. http://www.nightlybusiness.org/
05/23/03: Market Monitor-Elaine Garzarelli, President of Garzarelli.com
PAUL KANGAS: My guest market monitor this week is Elaine Garzarelli, President of Garzarelli.com. Welcome back to NIGHTLY BUSINESS REPORT, Elaine.
ELAINE GARZARELLI, PRESIDENT, GARZARELLI.COM: Nice to be here.
KANGAS: Do you think the upturn in the stock market since the March lows has already factored in the tax cut and its potential stimulus for the economy or can this market go a lot higher?
GARZARELLI: Well, I think it's factored in some, but, no, I think it can go a lot higher. I think we have a major, major, major signal here that we haven't had before, since 1999.
KANGAS: Well, we're hearing a lot of technicians say that this market is not cheap at all. It's high on an historical basis. What do you think?
GARZARELLI: I don't think so, because when we bottomed October 9th, the S&P 500 as a share of GDP was lower than it was in the bear market bottoms of the 1960s. There were three bear market bottoms where this time was it lower. And, also, if you took price as a percent of profits, the income tax profits, it's the same situation. In each of those bear market bottoms, the market ran up at least 70 percent before we went into another bear market.
KANGAS: So you obviously feel we are in a new bull market. Is it just a cyclical bull and a secular bear market or is it a secular bull market?
GARZARELLI: No, I think -- well, I think it's a secular flat market and I think we're in a cyclical bull market.
KANGAS: OK. So it's not going to last forever. You don't buy and put them in the lock box, is that the idea?
GARZARELLI: No, I think it could last for a year, a year and a half.
KANGAS: OK. And how high do you think it can get, let's say, in terms of the Dow?
GARZARELLI: Well, I think it can go up another 25 percent at least from here.
KANGAS: All right. Now you were quite bullish on your last visit with us as a market monitor August 16th of last year. The Dow was just a little bit higher than where it is now and we're higher on the NASDAQ than we were then, so you're right on NASDAQ. You gave us stocks like G.E. (GE) and Pfizer (PFE) and Darden Restaurants (DRI), and they're just a little below what they were. They had been higher after you came on and recommended them. But Sears (S) was a major disappointment. That's way down. What do you think about that?
GARZARELLI: Well, Sears is up 50 percent now since the bottom in March, on March 11th. So it's rebounding. The reason the market came down a little bit was because of the war and the uncertainty there.
KANGAS: But you did make some good scores with Lowe's (LOW) and Home Depot (HD) and Carnival Cruise (CCL). They are all higher than they were even back in August, and they've been even higher than that. So those were good calls.
GARZARELLI: Yes, well, all of them are about two or three times greater than the percent gain in the S&P since the March bottom, the March 11th retest bottom.
KANGAS: So you still like all of those?
GARZARELLI: I do, every one.
KANGAS: OK. Now, we're hearing a lot of talk about deflation. Do you think it's a real threat?
GARZARELLI: It could be. It could be. You know, China is in a deflationary environment. Germany's CPI is about to go negative. And there are recessions developing again in Europe. So there is a slight possibility, and I don't think Alan Greenspan wants that to happen, because we don't know what to do with deflation. We haven't had it since the 1700s, 1800s, except for the Depression.
KANGAS: Right. OK. You know, the old saying is take your profits in May and go away for the summer. But you seem to be quite bullish. Give us some new recommendations. I assume that you and your fund own all that we've mentioned already. Is that true?
GARZARELLI: Yes, I do. I do.
KANGAS: OK. How about some new recommendations, especially with this dividend tax cut? What about dividend paying stocks?
GARZARELLI: Oh, yes, there are a lot of good ones out there, Paul. I made a list of a few. For example -- and I own all these myself -- RJR (RJR) is yielding 11 percent and the stock is down 53 percent from its 52 week high. You know, Philip Morris Altria (MO) down 30 percent and that's yielding over six percent.
KANGAS: So you like the tobaccos.
GARZARELLI: Yes. J.P. Morgan (JPM) down 20 percent, yielding 4.4 percent. And Con Edison (ED) here in New York, minus nine percent from its 52 week high, and that's yielding 5.4. The other thing that you mentioned about going away in May, we looked over the last 20 years since 1980, not looking at the last three years of a bear market, but in 80 percent of the cases, the stock market actually went up from May through September, or stayed flat.
KANGAS: All right, so that doesn't bother you then?
GARZARELLI: Not at all. Not at all.
KANGAS: All right, very good, Elaine. We've got to run, but thanks very much for being with us again. We'll look forward to your next visit.
GARZARELLI: Thank you.
KANGAS: My next guest market monitor, Elaine Garzarelli, President of Garzarelli.com.
-- posted by SteveT
» SteveT - Re: 6/13/03 Wall Street Week with Fortune
In response to message posted by Kirk:Rally or speculation
GIBBS: And you could write a book about the bad rap short sellers get. They're accused of being greedy to being downright unpatriotic. In their defense, you could say they're just trying to keep a check on "irrational exuberance."
Noted short seller Bill Fleckenstein says batten down the hatches because this rally is a head fake. Bill joins us from Seattle. And Elaine Garzarelli does what many people say is impossible. She successfully times the market and says right now is the time to stock up on stocks, but forget about buying and holding…that strategy will no longer work. Bill, Elaine, thanks for joining us. Elaine, tell me about this market timing stuff. Is it real, or is it, as some people say, just a case of a broken clock being right twice a day?
ELAINE GARZARELLI: No. This is definitely a market-timing market, and we really haven't seen anything like this since the period of 1967 to 1982. Within that period we had three bull markets that saw 70 percent gains and then bear markets. And every low was a lower low. So during that period of time, if you didn't market time and you bought in 1967, you would have lost money by 1982.
GIBBS: So couldn't this be a bear market rally?
GARZARELLI: Well, it probably, I think it's a rally, and it's a cyclical bull market within a flat trend. I don't think the stock market...
GIBBS: Okay, wait a minute. What's that mean? Cyclical bull market?
GARZARELLI: The stock market went up like this from 1982 to 2000. Now it's going to be like this, but you're going to have movements around this axis. You want to sell when you're at the top, like you did in 2000, and you want to buy when you're at the bottom. And you want to ride it up, and then you want to get out again so you don't have to give everything up. Because if you go up 100 percent and then you go down 50 percent, it takes you 100 percent to get back to even.
Even if you look at the Nasdaq right now, we're still down 70 percent, and it would take a 200 percent increase in the Nasdaq for the people that bought and held just to break even, and 53 percent on the S&P.
GIBBS: Bill, what do you think about that? You're probably not the most popular guy at the party saying sell or at least don't buy stocks. Why?
BILL FLECKENSTEIN: Well, I actually believe that Elaine's thesis is correct, that over the course of the next whatever it's going to be, five years, 10 years, the people that are going to be, the majority of the people that will be successful will be those that buy at opportune times and sell at opportune times. Unfortunately, we don't know ahead of time exactly when those opportune moments are.
I think the rally that began in February and March was rather predictable. I, myself, was constructive that the market was going to have a rally for a variety of reasons. That did not mean that the risks were low then, and I think the risks are even higher now. And I think this particular rally that's been going on is probably going to end sometime in the next month or so. So I don't think it's a particularly good time for folks to load up on stocks. I think we're at the part, the phase where it might be a better idea to be a seller than a buyer. I don't think folks at home should contemplate short selling that.
GARZARELLI: No, I totally disagree with that. There's a big difference between now and the last rally we had from September 21st to April of '02, and that was a 40 percent rally in the Russell. We have corporate bond rates that have come down substantially. We have long-term interest rates that have come down. And we have operating profits up 26 percent from their trough. We have reported earnings up 46 percent. We have six consecutive quarters of real GDP growth.
GIBBS: So what do you think about those low interest...
FLECKENSTEIN: OK. Well, listen, listen, listen. We've had 12 rate cuts since the top of the market. None of them have done much good. The tax cut this time is smaller than last time. The fact of the matter is, is we still have too much capacity. People are still being laid off. We've had a rally, and because we've had a rally, now people are taking a few statistics and saying it's the start of something big. I don't believe that's the case. In fact, after every rally we've had, people have gotten all excited, and it's been the wrong thing. I could be right and Elaine might be...
GARZARELLI: Yeah, but this is different. It's not the same as the other rallies that we had. We already had three rallies since the year 2000. Not one of them was accompanied by a decline in the B, AA bond rate, and with the increase in lending by banks and with GDP growth at 4 percent. After 9/11 we had two quarters with 4 percent real GDP growth. Consumer sentiment is up 20 percent since the war ended. A little drop today of 5 percent, that happens every time at a major cyclical bear market bottom, in '82 and again in 1990.
GIBBS: Let's hear what Bill has to say. Bill, what do you have to say to that?
FLECKENSTEIN: Well, look, I could cite five inside baseball statistics that say that there's no change. I mean there's always going to be some change anytime the market goes up. You can find a few statistics. But we'll see whether or not this rally's different. All I'm suggesting is it's not the start of something big, and we'll find out. And I suggest it's very dangerous. There's been no real traction in the economy from jobs creation, or retail sales haven't really bounced since after the war. So I just think it's a very risky time to try to be an investor.
GIBBS: Bill, what about the housing market and consumer spending? Those things seem to be what we're pinning the hopes on the economy for.
FLECKENSTEIN: Well, right. I think this is what's kept people from recognizing the fact that we had the biggest bubble in the history of the world, and the workout process from bubbles is usually about a decade. It hasn't been as severe as it might have been because of the fact that we've been able to collapse rates has allowed people to take their debt up against their house, which has appreciated in value because rates have come down. And they've been able to live beyond their means and borrow from the future in terms of spending. But we notice that 0 percent loans aren't really helping the auto market. And so I think all of it's been, all we've been doing is borrowing from the future a little bit, and I don't think it's particularly sound because of the debt that's been taken on against the rising housing prices. So I think it's all very dangerous.
GIBBS: You don't think it's dangerous, and you're willing to wade in the water saying stock up on stocks.
GARZARELLI: May real retail sales were up 5 percent, in real terms, that is.
GIBBS: So what are you buying?
GARZARELLI: And equipment spending for the first time in the post World War II period. Businesses are wearing out equipment more than they're purchasing that equipment. So we think in 2004 with the tax cut and everything else, equipment spending in real terms could be up close to 11 percent. You're talking about 4.5 to 5 percent real GDP growth in '04; the second half of this year, close to 4 percent to 5 percent.
GIBBS: So the industrials, the basic materials area, you see attractive stocks?
GARZARELLI: Well, not the basic materials as much as the industrials.
GIBBS: Give me some names.
GARZARELLI: Well, gosh, I love McDonald's. That's not an industrial, but that's a dollar play. I like General Electric. That is definitely an industrial. And all these stocks that I'm mentioning here are down 50 percent. The S&P 500 is still down 53 percent, and these are all down much more than that.
GIBBS: With crude oil jumping over 30 bucks a barrel, would you buy any of the energy, the...
GARZARELLI: I would buy Chevron, and I think because it's a good dividend yield and the earnings should be better than the S&P next year. I like that oil stock. I like the oil service stocks like Schlumberger and Halliburton, and I also like Sears. Sears is down 55 percent, and I don't see why consumer spending isn't going to continue to rise. I think one of the things that people are afraid about is that we did have a bubble, and there is a problem with GDP growth reaching potential, which is about 3.5 percent over the long term. But this cyclical move here is good for the next year or year and a half, and then you may have to sell again. That's the part about market timing.
GIBBS: Bill, you don't think so. What about this dividend play? Do you think that's a reason to buy stocks at all?
FLECKENSTEIN: Well, that's the pretty interesting irony. A lot of people have been chirping about the dividend tax cut as a reason to buy stocks, and then you look and see what stocks have been going up the most, and it's been technology stocks and speculative stocks like Internet stocks and smaller, broken companies that can't possibly be paying dividends. So it's another of the speculative battle cries, but I don't think it's the reason why stocks have been going up. We're simply having a rally in a bear market. I want to say one thing about, Elaine, when you use a lot of these real, I think nominal data is a little more interesting right now. Because the hedonic adjustments that have gotten into the system have warped some of the real data, so I think that a lot of times the nominal data makes more sense than the real data.
GIBBS: Where should I put my money, Bill?
FLECKENSTEIN: Well, I think that if a person has the skills, I think foreign currencies and non-dollar assets. Foreign currencies, precious metals look pretty interesting. Other than that, I think it's a good time to try not to lose money, because the risk/reward ratio is not attractive now, and I think stocks and the economy are not going to do well in the second half.
GIBBS: All right, Bill. You've got the last word on it. Thank you very much, Bill Fleckenstein. Elaine Garzarelli, thank so much. Good to see you again.
-- posted by SteveT
» collguy - Re: Elaine Garzarelli is still bullish
I don't know much about her track record, but she sounded very "polyannish" when I heard on Brinker's show a couple of weeks ago when "broken clock" Kudlow was hosting. She seemed to be in the Kudlow camp of those who believe debt, oil prices, and record bankruptcy rates are meaningless. I don't pretend to know the future of the markets, but I would think these factors would give even the most optimistic pronosticator some pause.-- posted by collguy
» SteveT - Re: Elaine Garzarelli is still bullish
In response to message posted by Kirk:
Said something about how she measures earnings.
From her web site she says
"1996 Became bearish using Commerce Dept.'s cash flow earnings data. A few months after that, Greenspan made his "irrational exuberance" speech. (BOTH CALLS WERE CONSIDERD WRONG AT THE TIME) But actually, had the stock market stabilized beginning in 1996, the bubble could have been prevented. The numbers we were using were actually the best measures of earnings (Commerce tax-return data). Because the stock market continued to rise, we assumed our data was wrong. Thereafter, we used S&P profit data and, of course, valuation looked better. After all these years, being bearish in 1996 was the right call, and we were using the correct measure of earnings. Greenspan's "irrational exuberance" speech was also right on.
1997 Turned bullish in early February, after using S&P profit data instead of cash flow earnings in our model."
-- posted by SteveT
» Jas_Jain - Re: Indicators at 48% - You want TECH!
In response to Indicators at 48% - You want TECH! posted by Kirk:--
"Elaine says “you want to be in tech for the most part.” I guess she sees what I see. 
"
Two recognized geniuses at work. However, I doubt that her record is anywhere as good as yours, Kirk.
Elaine is a regular on Kudlow's show. So is Jeremy Siegel.
Jas
-- posted by Jas_Jain
» Kirk - PLEASE USE NEW FORUM ON NEW SITE
.We have a new discussion forum for Elaine Garzarelli on our new site here.
This forum is now closed. Please use the new Elaine Garzarelli forum for your discussion.
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