Tune out the Noise, beware of the Ivory Tower Academics
The biggest source of stock market misinformation are uninformed academics, so beware the Ivory Tower pundits
“Of all the armchair players who constantly opine about the stock market in the press,” Jim Cramer said during Monday’s Mad Money.
The “Professorate” are dangerous because being a professional economist has little to do with being a professional investor.
There’s little crossover, Mr. Cramer said. Academics are not veteran traders, they do not know how corporations operate, nor do they know the real details of the economy.
Nevertheless, the Nouriel Roubinis and Paul Krugmans of the World command lots of media attention. But, as Mr. Cramer said, they have “maximum influence but minimal understanding.” And, that is why you have to be especially careful when hearing their advice, I say tune it out and turn it off.
Consider Roubini and Krugman’s calls during the financial crisis to nationalize the biggest US banks. They pointed to the insolvency of these banks, but every one of them was able to raise private capital after passing the Treasury Department’s “stress tests.” Not only did the facts contradict Roubini and Krugman, but neither understood how detrimental nationalization would have been to the entire market.
What these chaps do not get is that nationalizing the US banks would have wiped out their preferred share holders and their bond holders, too.
Preferreds are one of the main ways that banks finance themselves, and the biggest holders of these shares are other banks. So the collateral damage from nationalization would have rippled out, causing as much pain as “half a dozen Lehman Brothers,” Mr. Cramer said.
“The US markets would not have recovered,” he said, “let alone had the super rally we caught in March 2009 off the generational bottom.”
Jim Cramer’s Bottom Line: Careful not to give too much credence to talking heads. Shayne and I whole heartily agree.
Paul A. Ebeling, Jnr
Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.
Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.
For More Information Contact
Chutinush Taksinapinunt (ANISTA)
Business Development Director
Heffernan Capital Management
Info@Heffcap.com
Join the HCM Sophisticated Investor List
Suite 53 Athenee Tower 63 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 THAILAND
Tel: +66 2 126 8045
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Mobile: +66 8 5997 0635
Email : info@heffcap.com
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Info@Heffcap.com
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Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment. You must also accept that opinions on stock markets change minute to minute, opinions expressed my change at any time without warning. Opinions maybe influenced by ad sales and other financial consideration. This site does not offer any assistance in making financial decisions.
The biggest source of stock market misinformation are uninformed academics, so beware the Ivory Tower pundits
“Of all the armchair players who constantly opine about the stock market in the press,” Jim Cramer said during Monday’s Mad Money.
The “Professorate” are dangerous because being a professional economist has little to do with being a professional investor.
There’s little crossover, Mr. Cramer said. Academics are not veteran traders, they do not know how corporations operate, nor do they know the real details of the economy.
Nevertheless, the Nouriel Roubinis and Paul Krugmans of the World command lots of media attention. But, as Mr. Cramer said, they have “maximum influence but minimal understanding.” And, that is why you have to be especially careful when hearing their advice, I say tune it out and turn it off.
Consider Roubini and Krugman’s calls during the financial crisis to nationalize the biggest US banks. They pointed to the insolvency of these banks, but every one of them was able to raise private capital after passing the Treasury Department’s “stress tests.” Not only did the facts contradict Roubini and Krugman, but neither understood how detrimental nationalization would have been to the entire market.
What these chaps do not get is that nationalizing the US banks would have wiped out their preferred share holders and their bond holders, too.
Preferreds are one of the main ways that banks finance themselves, and the biggest holders of these shares are other banks. So the collateral damage from nationalization would have rippled out, causing as much pain as “half a dozen Lehman Brothers,” Mr. Cramer said.
“The US markets would not have recovered,” he said, “let alone had the super rally we caught in March 2009 off the generational bottom.”
Jim Cramer’s Bottom Line: Careful not to give too much credence to talking heads. Shayne and I whole heartily agree.
Paul A. Ebeling, Jnr
Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.
For More Information Contact
Chutinush Taksinapinunt (ANISTA)
Business Development Director
Heffernan Capital Management
Info@Heffcap.com
Join the HCM Sophisticated Investor List
Suite 53 Athenee Tower 63 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 THAILAND
Tel: +66 2 126 8045
Fax: +66 2 126 8080
Mobile: +66 8 5997 0635
Email : info@heffcap.com
New York
347 5th Avenue, Suite 1402-508 NY, NY 10016
Tel: +1 646-403-9881
Fax: +1 646-403-8014
Singapore
3 Raffles Place #07-01 Bharat Building Singapore 048617
Tel: +65 6329 6408
Fax: +65 6329 9699
Info@Heffcap.com
Get the Updates Daily
Your use of any of the Websites or any of the Services (defined below) constitutes your agreement to be bound by and comply with the Website Terms and Conditions and your consent to the collection, use and disclosure of personal information as described in the Privacy Policy. If you do not so agree and consent, you are not authorized to visit or use our Websites or the Services.
Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment. You must also accept that opinions on stock markets change minute to minute, opinions expressed my change at any time without warning. Opinions maybe influenced by ad sales and other financial consideration. This site does not offer any assistance in making financial decisions.
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