Luskin: Buy Stocks, Buy Citi (11/07) Sell Stocks (3/09)

Invictus is a bulge bracket asset manager with $100+ million AUM. He has no patience for money losers, hacks, partisans pretending to be financial analysts . . .  this is the first in a series of critical looks at analysts, media, economists, financial TV. Feel free to share any thoughts in comments.

Here’s Invictus:


I’ve been reviewing some older columns that stood out to me as giving especially bad advice during  the period near the market peak. One in particular stands out as especially bad — poorly reasoned, not well thought out, full of weak analysis. It was amongst the worst of the money losing financial advice Smart Money has ever run. If I find more examples as bad as this one I am going to suggest the magazine change its name to Dumb Money.

Let’s set this one up first: This weekend, in Barron’s Alan Abelson devoted part of his column to the travails of Citibank:

“THE CITI NEVER SLEEPS. AND WE couldn’t, either, if we were Citigroup, given the way things have been going for the bank and its shareholders. The bank is wallowing in the red, and the stock, which sold at 56 and change in 2007, is now less than 3.50.

Moreover, among its other woes, it’s in a legal battle with Abu Dhabi, whose sovereign wealth fund is trying to squirm out of a deal closed back in November ’07 that obligates it to buy $7.5 billion of Citi stock at $31.83 a share come March.”

It seems like only yesterday that Don Luskin, a top Ideological Hack Hall of Famer, told us the 11 Reasons to Buy Now — this was in November 2007, a month AFTER the top, that Abu Dhabi’s investment in Citi was proof that Citigroup and the market were both cheap:

“ADIA’s investment in Citi means that stocks have gotten very, very cheap. Mega-investors like that only step in with $7 billion when they are getting a deep bargain.”

Or not.

The S&P was in the 1400’s at the time, Citi in the mid-30’s or so.  I’ve chronicled Luskin from time to time, and put together an incomplete Greatest Hits over a year ago.

It’s not just his pompous, arrogant, know-it-all attitude that is annoying about Mr. Luskin. Rather, its that all of his commentary seems to be that of a broken clock. He has been bullish as long as he has been on TV. The only time I have seen him bearish was yhis one exception: On March 6, 2009, he finally capitulated his bullish stance. Of course, this was RIGHT AT GENERATIONAL MARKET LOWS. Luskin wrote in Even Worse Than the Great Depression that:

“We can’t blame President Obama for the mess he inherited. But we can definitely blame him for making it worse. Stocks are off 28.4% since his election, 15.2% since his inauguration, and 17.2% since his so-called “stimulus” bill was enacted. To say the very least, whatever he’s doing, it ain’t working.”

And there is the partisan hackery he is so famous for. Since that politically inspired post, the S&P has rallied 63%. No word from DL as to what this rally means.

I hold no animus toward those who get it wrong in finance/economics. We all do. It goes with the territory. I do hold a fair amount of ill will toward those who distort facts, deliberately mislead others, or otherwise dissemble to support an ideological position. (As another example, see this 2008 foolishness about Housing  data).

Refusing to acknowledge one’s mistakes when presented with incontrovertible evidence is similarly a no-no in my book. And these folks need to be called out on their nonsense. It is both intellectually dishonest and counter productive.

Smart Money readers should learn to ignore his money losing advice . . .


11 Reasons to Buy Now
Donald Luskin
Smart Money, November 30, 2007

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