"A more sober analysis suggests we're closer to the bottom; there is light at the end of the tunnel, but it's going to take a while longer, and..."
-Nouriel Roubini
And…After flying around in helicopters and feeding the manic media with his Doctor Depressionista interviews for the past 3 months, the man, the myth, the legend has revealed himself Wednesday morning – Tah-Dah, it's Roubini The Revisionist!
Not unlike most “economists”, Roubini is susceptible to gravity. The gravity of marked-to-market prices that is. Prices don’t lie; people do. “And…” a +34.6% move in the US stock market since March 9th will apparently “sober” up one’s views. Well done Nouriel. You can now go back to being just another economist who made a big call.
“Making the call” is what we all get paid to do in this business. Sometimes we’re right, sometimes we’re wrong. Being really right can make you eight to nine figures, and being wrong, well… depending on who you work for… sometimes has no downside at all.
One of my passions in life is calling people out. Call it aggressive, or call it plain dumb – I am a hockey player by training don’t forget, and that’s just what I do. Whether it's holding Hank The Market Tank Paulson or Roubini The Revisionist accountable, it’s all one and the same. Someone may as well do it.
Revisionist historians have populated Wall Street for over a hundred years. Once we get through month’s end, you can expect to see plenty of their writings from the hallowed halls of the once vaunted sell side “strategist” who is now parroting the 6 month old REFLATION call, to the buy side. This is what makes this game so entertaining to observe.
Right on schedule, after the US stock market put in another lower-high Wednesday, you’re seeing 74% of America’s finest revisionists presciently predict that the US recession could end by Q3 (as in 6 weeks from now). How wonderfully late this reactive prediction is from the National Association of Business Economics. I’ll spare the revisionist participants the embarrassment of reminding you what their “forecast” was in February (hint: it was closer to Roubini’s).
“A more sober analysis” suggests that the prior analysis involved what? A few cocktails? God knows what Roubini does when no one is looking, but assuming he is as careful with his words as one should expect a soothsayer to be, I’ll take his word for it.
The New Reality is simply that very few analysts, strategists, or economists called the top of the 2007 US market move as well as the bottom of the 2009 one. Is that a surprise? Hardly. But Washington and Wall Street should be learning a very important lesson from this – reactive analysis provides performance paralysis.
If our Almighty Ones are now admitting to sipping from the ole Sapporo without a proactive plan to address what Breaking The Buck could equate to, how in God’s good name should we entrust our children’s futures with their latest predictions? At what point in the last 18 months would you have been well positioned if aligned with the consensus of 74% of “economists”?
An understanding of the difference between a US currency breaking down versus one that’s on a crash course for a crisis would seemingly require one to have understood the REFLATION call from its inception.
As CNBC rolls out the revisionists, I think we are going to roll right into lower-highs. If the US stock market finds a way to break out to higher-highs in the face of a pending currency crisis, I’ll be the first to admit that I had the latest leg of my 2009 market call wrong. As prices change, I will.
Here are some immediate-term domestic price levels to focus on:
1. SP500 levels of 934 (January 6th) and 929 (May 8th)
2. Nasdaq 1764 (May 4th)
3. Russell 2000 levels 507 (January 6th) and 511 (May 8th)
I know, we’re very close to some of these lines. But I’m also sober… and I have a process that is my own – ah the weaponry.
To be clear, I am not making a call that China or Gold won’t make higher YTD highs. As our British philosophy Captain of the Revisionist League likes to say, I am “long of” both those asset classes “whilst” having very high conviction in them.
While everyone is getting jazzed up with our REFLATION call or the MEGA Consumer Squeeze call this morning, just take a deep breath, and take a good hard long look in that rear view mirror. These bullish calls aren’t new.
All the while, remember that Roubini The Revisionist is now sitting beside you in the passenger seat – and he’s not alone. This morning’s weekly sentiment survey has Bulls shooting up to 41% (from the mid 20’s in March) and Bears dropping like flies down to 28% (from the high 40’s in March). Sentiment in this market is finally bullish enough for me to get out of the way on the long side. As I start to wander on over to the ole Bear camp again, I wonder if anyone is still left standing? The booze is definitely gone!
My immediate term upside target for the SP500 is 918, and I have downside support at 896. Trade the range.
