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Money Managers Called the Summer Market Plunge
NEW YORK (MarketWatch) August 10, 2011
- Reprinted with permission from our friends at Pension Partners:
Don't let anyone tell you this ugliness in the stock market was unforeseeable.
On June 8, in a financial world otherwise frothing with happy talk, money manager Michael Gayed posted a piece on financial analysis blog, Seeking Alpha, headlined, "The Summer Crash of 2011, Or the Great Re-Adjustment." Read the whole thing here.
Gayed wondered: If a bull market was truly on, why were defensive sectors - consumer staples, health care and utilities -outperforming the broader market? Typically, these stocks are where investors run to hide in a recession. Oh, and why were bonds beginning to outperform stocks -even as the Federal Reserve ended its QE2 bond buying program?
"The bond market is clearly afraid of something," Gayed wrote. "The stock market has not yet noticed what the bond market is screaming."
From there, Gayed authored a few other pieces and suffered the inevitable heckling that followed as the stock market roared higher.
"One reader wrote me an email saying, you should stop writing about a summer crash," Gayed said in a telephone interview. "All I did was send a response saying, 'the summer's not over yet.'"
Gayed began his June 8 piece with a timeless quote from German philosopher Arthur Schopenhauer: "All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident."
Welcome to the self-evident phase of Gayed's truth.
Gayed is the chief investment strategist at a small firm called Pension Partners LLC in New York City, where he helps manage about $140 million. I talked with him for about an hour on Monday, even as the Dow Jones Industrial Average slid another 635 points. He had so much time on his hands, he even put the firm's founder, Edward Dempsey, on the call.
"We're having an easy day," Dempsey said. Clients weren't calling, all freaked out about the market melee because Gayed and Dempsey had jumped out of stocks before things turned nasty.
Gayed and Dempsey are quantitative analysts who study interrelationships in the market and come up with insights most everyone else should see, but somehow don't.
[Read the rest of the article...]
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