Blaming the Retail Investor

Wednesday, August 01, 2007 | 11:45 AM

Earlier today, I mentioned  an example of the wrong analysis/right investment posture. Here's a perfect example of that:

Last week, I read this surprisingly ugly quote from TrimTab's uber-Bull, Charles Biderman:

"Fear and ignorance seem to be gripping retail investors these days," said Charles Biderman, chief executive of Santa Rosa, Calif.-based TrimTabs on Thursday.  "There's no credit risk; no bank is going to lose money on this subprime fear," he added. "Income-tax collections are strong, and you don't have a housing collapse when wage income and job growth are surging.  This is a complete panic by individual investors," he commented. "They just don't know what's going on." 

My initial reaction was total annoyance. I was meaning to pen a response to Mr. Biderman, but then I saw the response written by Jack McHugh of Praetorian Advisors, and any further words on my part had become unnecessary. Last week, Jack wrote:

"Sorry, but the ignorance is yours, Mr. Biderman. Banks have already lost tidy sums "on this subprime fear", and home prices are indeed collapsing in many locales. Whether it all spreads to the general economy is the question we need to answer if we are to know whether to load the boat with tech stocks right now or take a more conservative approach.  In my opinion, it's tough to see how tougher lending terms and pricier credit WON'T impact our economy. 

And as to whether stocks are a bargain right here because they've dropped a few percentage points off the recent highs, try to remember that a "normal" correction takes prices down by 10% or more. Keep in mind, too, that the 52 week gains in the major averages from last July until last week's highs are as follows:  The Dow was up 28%, the S&P was up 25%, the Russell 2000 was up 27%, and the NASDAQ was up a full 33%. 

That some of these averages have given up 5% or so really isn't much in the context of the run they've had just in the last year.  So, no, we're not there yet; we might instead have quite a way to go."   

--Jack McHugh, Praetorian Advisors

Why blame the underwriters of mortgages who sold these sub-primes to unqualified persons, or the  investment banks that packaged and re-packaged them, or the prime brokers that provided the leverage to hedge funds to buy this junk, or the hedge fund gunners who owned all this shite without really knowing what was in it -- when, instead, we can place all of the blame on the small investor?

What an asshat . . .


U.S. mutual-fund assets drop $5.5 billion
Murray Coleman
MarketWatch, 1:51 PM ET July 26, 2007

Wednesday, August 01, 2007 | 11:45 AM | Permalink | Comments (58) | TrackBack (1) add to | digg digg this! | technorati add to technorati | email email this post



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» Consumer Spendables Indicator from The Big Picture
I'll give TrimTab's Charles Biderman credit: He is not the one trick pony I previously pegged him as. To review: Back in August, I read this horrifically ugly quote from Biderman in Marketwatch:Fear and ignorance seem to be gripping retail investors th... [Read More]

Tracked on Mar 3, 2008 7:05:26 AM


I thought that the retail investors dumped all of their money into remodeled/second homes?

I'm sure if someone does a Lexis/Google search on Biderman there will be some quote in which he says the markets will be posed to go even higher once the retail investor wises up that there's a bull market and jumps in a la the cover of Barron's a few weeks back.

What kind of boss keeps these types of people?

Posted by: johntron | Aug 1, 2007 11:51:08 AM

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