I fired off a quick post yesterday about the “news” that Goldman Sach’s Abby Joseph Cohen declared the recession over. If you missed it, I made the point that an arrow pointing up painted on a wall had just as accurate of a track record as Ms. Cohen did over the past decade or so. For some reason, Cohen has a set of groupies, or fan boys, or whatever that always like to remind people of when she was “right” and, of course, always forget about when she was wrong.
The truth is that Abby Joseph Cohen has never been “right”. If your answer to a yes/no question is always the same, you aren’t getting the questions right. You are just happening upon the questions that were written with a yes answer. That isn’t intelligence or ability, that’s statistics.
Still, so as to avoid anyone showing up and (publicly, so far, it’s only messages) saying that I have forgotten about all the really great “calls” she has made, I offer the following factual data as proof that any upward pointing arrow would have made, and lost, investors just as much money as Abby Joseph Cohen over the last 10 years.
1990s – The Internet Bubble – Cohen first came to prominence in the late 1990s by continuously predicting the stock market would move higher and higher. When other analysts were “wrong” by noticing that the ever higher values being obtained by stocks were unsustainable and calling for caution or even slow growth, Cohen was always there to be “right” by saying HIGHER, HIGHER. (Just like the arrow.) For those of you who want to call someone thinking that the prices and valuations of the late Internet Bubble were not only reasonable, but that they should be even higher, then you may consider her tenure during the bubble successful. The rest of us will consider her to have been the Chief Jester of the stock markets most comically irrational and irresponsible phase since the run-up to the Great Depression.
2000 – The Internet Bubble Pops – In perhaps the least honest case of “spin” on Wall Street prior to the shenanigans of 2007, 2008, 2009, Cohen and her supporters like to claim that she called the pop of the Internet bubble by issuing a March 2000 call to lighten exposure to equities. That so-called call or “right move” made in March 2000 was to cut her recommended allocation from 70% stocks to 65% stocks!
Holy, freaking, whoopee-doo, Batman!
How much money do you think it saved you to shift your investments from 70% to 65% stocks right before the market tanked? This tiny adjustment of just 5% less stocks would be the only “right” call Cohen would make for the next 3 years. Put it this way, if you kept listening to Cohen, by the time she was “right” again (incidentally, the exact same time the arrow would be right again) you had probably lost all of your money.
What is worse, is that the whole thing is a lie when it comes to calling 2000 right. In the very same research note where Cohen advised clients to make the enormous leap from 70% to 65% she did not change her end-of-year estimate for the S&P 500 which was 1,575.
When the NASDAQ fell 575 points (13.6%), Cohen, who was at the White House, said she was “enthusiastic about the outlook for stock prices.” Oops. Have you ever notice has she doesn’t mention that in those interviews when she claims to have gotten 2000 right?
If that wasn’t enough, in November, 2000, Cohen stated that she thought the S&P 500 was undervalued on a 12-month view.
In other words, for all the spin you want to use, Cohen was WRONG on 2000, just like arrow.
By very early 2001, she was back again calling for a bang-up year in the markets moving that famous “great call” allocation back to 70% equities from 65%. Do you think an investor saved more money by going from 70% to 65% for the 12 months between March 2000 and March 2001 than they lost by going back to 70% from March 2001 through the end of 2002?
She wouldn’t be right again until 2003, calling for an up year and more investment in the stock market every single year like a broken record. In 2001, she called for 1,650 S&P 500; it was 1,148. In 2002, she called for S&P 500 to end at 1,425; it was 880.
2003 – Right again, just like the arrow. A broken clock is right twice a day. How about an analyst who predicts the market will go up every year? If you still had any money left after listening to Cohen over the last 3 years, you got some of that back in 03.
Anyone want to do the math? Don’t bother, the amounts you lost in 00, 01, 02 would have not come anywhere near being offset by the money you would have made on your much reduced nest egg.
You can use Google to find every prediction for next handful of years. I’ll give you a hint, she predicted an up market for every single one of those years too. So, just like the arrow, she was “right” during those years.
But, here comes the laugh riot that should remind you that the Magic 8 Ball Cohen uses is defective.
12/04/07 – CNBC — Abby Joseph Cohen, chief investment strategist at Goldman Sachs, says the U.S. economy will rebound in mid-2008, but the next few months will be bumpy.
2008 – Cohen predicts (surprise) an up market for the year, projecting an end-of-year S&P 500 of 1,675 for 2008.
You might remember 2008 as the year of the great stock market crash thanks to the real estate bubble bursting and taking down the banking and financial sectors with it.