Quotes from 2008

My dad’s a banker and sends me financial data, analysis and forecasts daily as he reads through mountains of this information and picks out the relevant/interesting stuff. Below is from an email he sent me today revealing just how ridiculous and off base some of the seemingly educated and informed talking heads are in the financial sector. Though this isn’t new news to most of us, it is entertaining. Enjoy.

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BusinessWeek published some good (I mean terrible) quotes from 2008. Here they are: (the comments are theirs, not mine).
1. “A very powerful and durable rally is in the works. But it may need another couple of days to lift off. Hold the fort and keep the faith!” —Richard Band, editor, Profitable Investing Letter, Mar. 27, 2008
At the time of the prediction, the Dow Jones industrial average was at 12,300. By late Dece mber it was at 8,500.

2. AIG (AIG) “could have huge gains in the second quarter.” —Bijan Moazami, analyst, Friedman, Billings, Ramsey, May 9, 2008
AIG wound up losing $5 billion in that quarter and $25 billion in the next. It was taken over in September by the U.S. government, which will spend or lend $150 billion to keep it afloat.

3. “I think this is a case where Freddie Mac (FRE) and Fannie Mae (FNM) are fundamentally sound. They’re not in danger of going under…I think they are in good shape going forward.” —Barney Frank (D-Mass.), House Financial Services Committee chairman, July 14, 2008
Two months later, the government forced the mortgage giants into conservatorships and pledged to invest up to $100 billion in each.

4. “The market is in the process of correcting itself.” —President George W. Bush, in a Mar. 14, 2008 speech
For the rest of the year, the market kept correcting…and correcting…and correcting.

5. “No! No! No! Bear Stearns is not in trouble.” —Jim Cramer, CNBC commentator, Mar. 11, 2008
Five days later, JPMorgan Chase (JPM) took over Bear Stearns with government help, nearly wiping out shareholders.

6. “Existing-Home Sales to Trend Up in 2008″ —Headline of a National Association of Realtors press release, Dec. 9, 2007
On Dec. 23, 2008, the group said November sales were running at an annual rate of 4.5 million—down 11% from a year earlier—in the worst housing slump since the Depression.

7. “I think you’ll see [oil prices at] $150 a barrel by the end of the year” —T. Boone Pickens, June 20, 2008
Oil was then around $135 a barrel. By late December it was below $40.

8. “I expect there will be some failures. … I don’t anticipate any serious problems of that sort among the large internationally active banks that make up a very substantial part of our banking system.” —Ben Bernanke, Federal Reserve chairman, Feb. 28, 2008
In September, Washington Mutual became the largest financial institu tion in U.S. history to fail. Citigroup (C) needed an even bigger rescue in November.

9. “In today’s regulatory environment, it’s virtually impossible to violate rules.” —Bernard Madoff, money manager, Oct. 20, 2007
About a year later, Madoff—who once headed the Nasdaq Stock Market—told investigators he had cost his investors $50 billion in an alleged Ponzi scheme.

10. A Bound Man: Why We Are Excited About Obama and Why He Can’t Win, the title of a book by conservative commentator Shelby Steele, published on Dec. 4, 2007.
Mr. Steele, meet President-elect Barack Obama.

With all the talking heads out there, it probably wouldn’t be hard to find some silly comments, but these aren’t talking heads. These are Ph.Ds (they’re supposed to know what they’re talking about), politicians (they have huge staffs that can do massive research for them), journalists (they’re supposed to be experts in their field) and T. Boone Pickens (who should know better).

These quotes are the #1 reason I’m a technical analyst who doesn’t pay attention to the fundamentals or the story. The best and the brightest are often wrong. A chart will tell me very quickly if I’m wrong, but the fundamentals or story will lag so small losses turn into big losses. It’s much more reliable to study the price action – because you’re trading the price action – and leave the other stuff alone.