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Berkshire Hathaway Inc. Message Board

  • bowboe1015 bowboe1015 Nov 25, 2003 6:48 PM Flag

    Once Bernstein is fired it will be

    time to take some serious cash off the table:-)

    From dailyreckoning.com

    "Which brings to mind a related phenomenon, variously known as the "Pink Slip Indicator" or the "Sell Side Indicator."

    - Here's how it works: major Wall Street firms fire their bearish strategists immediately before major sell-offs begin, and fire their bullish strategists immediately before major rallies begin. According to this indicator, the stock market may be approaching the end of its year- long rally...The Pink Slip Indicator is flashing yellow.

    - "Amid a rising tide of complaints," Reuters notes, "Merrill Lynch & Co.'s chief U.S. strategist, Richard Bernstein, is seeking to defend his bearish view of the stock market from investors who believe he is hopelessly wrong...Bolstering critics' argument that Bernstein is off the mark is a 17.5 percent rise in the Standard & Poor's 500 Index so far this year. The benchmark index closed at 1,033 on Thursday - significantly above Bernstein's year- end target of 880."

    - Merrill has not fired Bernstein...yet. But we are holding a vigil - and are readying our sell orders - for the day that Merrill replaces him with a strategist that voices a staunchly bullish outlook.

    - Poor Merrill Lynch...the white-shoe firm just can't seem to get it right. Back in the late 1990s, strategists like Abby Joseph Cohen and Joseph Battapaglia were making daily headlines with their incessantly bullish forecasts. Abby Cohen became a minor celebrity and brought accolades, fame and fortune to her employer, Goldman Sachs. Meanwhile, Merrill Lynch employed the habitually cautious Charles Clough as its chief strategist.

    - While Abby and the other bullish seers were cheering from the sidelines, Clough urged restraint. Eventually, the top- brass at Merrill could no longer stand the humiliation of endorsing Clough's bearish posture during the greatest bull market of the 20th century...Early in 2000, Merrill urged Mr. Clough to "pursue other interests."

    - "Just before the bubble popped in 2000," Bull & Bear Investor recalls, "several Wall Street brokerage houses fired their most bearish strategists and economists...Chuck Clough was shown the door at Merrill Lynch. His doom and gloomster colleagues who suffered the same fate included J.P. Morgan's chief strategist Douglas Cliggott, Salomon Brothers' market strategist David Shulman and Oppenheimer's renowned chief strategist Michael Metz. With the benefit of hindsight, all were fired for being correctly bearish."

    - Merrill replaced Clough with uber-bull Christine Callies. The new chief investment strategist tried to make up for lost time by urging Merrill Lynch clients to buy stocks aggressively throughout 2001, even as the stock market was collapsing.

    - Merrill was twice chagrined. The firm fired Callies in December of 2001, replacing her with the bearish Bernstein. Callies was the first of several high profile bulls to receive pink slips as the stock market headed toward its bear market lows of October 2002. "During the go-go years," CNN/Money observed one year ago, "nobody pounded the table quite as hard as Lehman Brothers' Jeff Applegate and Credit Suisse First Boston's Tom Galvin. Both had replaced bearish predecessors and both became progressively more bullish as the rally wore on. When the market hit a top in March 2000, they were each recommending that clients keep a whopping 80 percent of their portfolios in stocks."

    - Alas, Applegate and Galvin both drew pink slips in the fall of 2002, just as the stock market was embarking on a massive, new bull market rally.

    - Today, investors are very optimistic and bearish strategists are fighting off angry mobs...Hmmmm...maybe it's time to hold a mirror beneath the nostrils of this bull market."

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    • bow,

      Great stuff. Thanks. I'll watch for the Bernstein indicator.

      I just think we'll see a blow off, not this steady climb, at the end and that the bull will "have to be killed" rather than just "die of old age." I'd guess the most obvious causes. Rising rates or a fast-falling dollar. But until the day when the bulls have to tie themselves into pretzels to explain why rising rates or a crashing dollar aren't really "all that important," I plan to stay at the party. Thanks again. During my fairly brief time in the market, the "analyst indicator" sure is about as perfect as it gets!

 
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