Barron’s Mike Santoli points out a short list of market myths that currently seem to have currency amongst the investing and chattering classes.
The five are:
• “The dollar is collapsing.”
• “Portfolio managers are trailing the market and might need to rush into stocks.”
• “The hoopla over Dow 10,000 shows that Wall Street is back to cheerleading the market.”
• “The size and speed of this rally is unprecedented.”
• “Goldman Sachs is back to maxing out employee compensation.”
Each of these overstate — or at best, misstate — their respective subjects:
Dollar: The ICE U.S. Dollar Index is about where it was a year ago, and is above where it spent much of 2008.
Underinvested Portfolio Managers: The broad rally has made outperformance of the indexes the norm. Lipper fund-tracking reports the average U.S. equity fund is about 5% points ahead of the S&P500.
Cheerleading: Consensus price targets in January 2009 amongst big Wall Street firm strategists was 1050; the current consensus target is…1049.
Unprecedented rally: The massive 1937-38 market surge is quite similar. fits quite tightly. The 1974-75 gains are also similar. The 1982 rally also looks similar.
GS Comp: Q3 comp is 43% of revs, down from 48% in Q2, and off from historical average of 50%.
Good stuff, Mike!
Five Modern Myths
Barron’s OCTOBER 19, 2009