Read it here first: Back on November 6, we discussed S&P500 ex-Risk ?
That commentary suggested that the S&P500 failed to properly anticipate the Financial sector’s massive — and ongoing — risk driven losses. We further hypothesized that, had their been more credible risk assessment, a variety of data points — from year-over-year Earnings, to stock valuations, to risk adjusted returns, to measures of undervaluations — would have produced radically different results.
A reader forwarded us a November 25 NYPost article that made essentially the same point: 14,164.53* CRITICS: DOW MARK IS TAINTED:
Critics of credit reporting agencies and Wall Street analysts say their failure earlier this year to properly warn investors about the possible extend of the subprime mortgage meltdown tainted the 14,164.53 record high of the Dow Jones industrial average.
Therefore, the critics say, the record high hit on Oct. 9 should carry a Barry Bonds-like asterisk – because it was reached unfairly.
"These were phantom Dow highs in that they were predicated on unrealistically low expectations of risk in the housing market," Christian Stracke, a senior strategist at CreditSights in London, told The Post last week.
"It was a fool’s rally and a fool’s record Dow high in October," snapped Chris Whalen, managing director of Institutional Risk Analytics. "This whole thing was built on colossal and very deliberate deception of investors with opaque products like CDOs."
My pal Mike Panzner has a subtle quote in it:
"Credit market conditions had been steadily deteriorating ever since the bubble burst in housing," said Michael J. Panzer, the author of "Financial Armageddon." "Any analyst the claims he didn’t see it coming is kind of an idiot."
Here’s the NYP chart:
14,164.53* CRITICS: DOW MARK IS TAINTED
JOHN AIDAN BYRNE
NYPost, November 25, 2007