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Grossed Out


The Daily Diatribe:

Bill Gross, Pimco’s Chief Investment Officer, on CNBC today said that stock and bond returns will be below normal for years. Calling it the “new normal”, Gross could not be more wrong. Whenever I hear phrases like “the new normal, or “it’s different this time”, I lick my chops. First of all, let’s get this on the table. Bill Gross does not know what the future holds; he especially doesn’t know squat about stocks. I am willing to concede that he has been one of the better bond mavens on the street, but he certainly did not cut his teeth on evaluating stocks. Here’s the deal. In my 25 years in the financial services industry, there have been countless gurus. They get anointed as the way, the path, the light, the chosen one and then when they are wrong, they get tossed aside only to emerge years later because the beast must be fed; more about that later.

Here’s a list of those folks who supposedly knew what the market was going to do over the last 25 to 30 years. Howard Ruff was a gold buff who said that the market was going to stink back in 1982. Of course, the market then went straight up for 20 years. Bob Prechter, the Elliot Wave theorist, said that the market was going to hit 3700 as part of his three wave hypothesis just before black Monday of 1987 when the market went straight down to 1738. Elaine Garzarelli, famous for calling the 1987 crash, said that the market at 6,000 would see 4,000 before it saw 8,000 only to see the market go straight to 9,000 at which point she reversed course and said that she saw it going up. What’s the point of all of this prognostication? They don’t know what the market is going to do. We just think that they do, and that is because of their prominence in the media.

With the advent of CNBC, FNN, Bloomberg, and now FBN, programmers are faced with having to book people to appear in order to attract an audience. The audience knows these people or at least recognize their names. Because the media beast needs to be fed, these folks resurface, and goodness knows that what they say certainly sounds reasoned, and well thought out. It is, but that does not mean that their crystal ball is any clearer than yours. It isn’t, by the way.

Heck, I even saw Abby Joseph Cohen on the tube the other day. Now, there is a blast from the past. She was monumentally wrong on the market during the sub-prime mess, but there she was pontificating yet again on stock market direction. Now, don’t get me wrong; the media has a place in figuring out what we need to be doing with our money. I think it is invaluable for reporting economic indicators and the like. I just have issues with the celebrity mentality that follows Wall Street.

Folks, there are no gurus. They are just Joe and Jane Six-packs with big salaries, big educations, and big credentials. In other words, they are you dressed up to look better than you on TV.

Word to the wise.

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