Cramer Vs. Roubini - Grist to the Mill
First, let me be clear that I have very little respect for either of them. Just to set the record straight.
It should be interesting, however, to perform the following experiment:
Find Cramer’s first call of a bottom in this stock market move. Wait for the eventual bottom to have made itself clear in retrospect. Measure how far off Cramer was, both percentage-wise and temporally, and so note those differences.
Find Roubini’s first prediction of a recession and stock market crash - that is, the first one where he associates a date or timeframe with it, as in “by this time next year,” etc. Measure how far up the market moved from his first crash call until the market peak last year. Wait for the NBER to officially call the start of a recession (IF they do! Not a foregone conclusion by any stretch of the imagination) and see how far off Roubini was from the actual starting date.
Make no mistake, I think they’re both @$$clowns. But I’m pretty sure Cramer’s gonna come out closer than Roubini on that measurement.
September 29th, 2008 at 5:51 am
From a portfolio management perspective, this line of thinking ignores the asymmetry of gains versus losses. It takes a 100% gain to recover from a 50% loss.
The implication is that it is MUCH LESS damaging to be early on a recession/bear market call and play defense accordingly then to be too early on a bottom and get aggressively long.
For example, being bearish on the overall stock market in 2006 which obviously was too early as already been vindicated given the magnitude of the decline over the past 12 months. Being too early on the “financials have bottomed” call that many were making in Oct-Dec 07 probably will take many many years to recover from if one was buying on that call then.
September 29th, 2008 at 6:07 am
Do you think 2006 was the earliest crash call from Roubini?
Adjusted for divvies, the SPY was at 121 in Jan 2006. Damn near three years to breakeven, not including carry costs for the short. If you think that’s “vindicated” then you have some serious “bear goggles” on. Crash calls in 2005 are still out of the money.
Here’s some asymmetry - losing 21% on a short over almost three years means they need 27% gains on the short now, plus need to make up cost of carry on the short.
Ping me if Cramer’s call of the bottom in the overall indices turns into a 21% loss.
September 29th, 2008 at 6:18 am
There’s a saying; if you keep calling for a bottom, eventually you’ll be right. It has a flip side …
If you keep calling for a top, eventually, you’ll be right.
September 29th, 2008 at 7:37 am
Who said anything at all about shorting, or carrying a short position in the S&P 500 for some lengthy time frame?
The average portfolio, whether retail or institutional (such as an endowment or pension) operates from the framework of how much to have invested in stocks versus bonds or cash. There is no consideration WHATSOEVER about shorting the market or carrying short exposure.
From that context, any funds held in bonds or cash have outperformed the broad stock market from a time period when you have persistently enjoyed calling out all the “permabears”.
FWIW, in my long-term portfolio, I have ZERO short exposure, and have mostly long exposure in stocks and stock funds. I’ve got no allegiance to any “bear goggle” position. But the simple fact of the matter is that you have been an extremely vocal critic of the view that leans bearish, and given the events of the past 12 months both in the economy, market, financial sector, housing, etc. I find it amusing that you can’t give a little credit where credit is due (such as Roubini), and can’t admit you were wrong to some degree both in your views and criticism.
September 29th, 2008 at 7:46 am
Check the other site’s Timing commentary for my comments about my comments about the Jan/Mar “bottom.” If that wasn’t enough for you, that’s really too bad. You don’t HAVE to read here.
I didn’t ask about your positions, Mike. Nor did I ask about the “average” portfolio. It’s a hypothetical exercise.
If you want to compare a top call (Roubini’s made dozens since 2005, maybe since earlier still) to a bottom call (Cramer’s), then you compare hypothetical short positions initiated at the top call to hypothetical long positions initiated at the bottom call.
I invite you to do the math on Roubini’s FIRST calls for a crash; and wait as least as long as from then til now to evaluate Cramer’s call.
Here’s the credit where credit is due, in the comment above … “If you keep calling for a top, eventually, you’ll be right.” That’s as much credit as someone calling a top, repeatedly, for many years, deserves.