Global: Who needs Enzio's Economic Clock?
Introduction
We have little value to add at this stage of market jumpiness. Subscribers know what The Economic Clock™ is presaging particularly about America, and they also know about our views concerning "de-coupling" as well as what is "different" this time. Crucially, they also have been told how to save - or indeed make money off our advice.
So we want to step back and re -address this issue of who in the first place even "should" be interested in The Economic Time™ as an investment compass - and who should not. We cannot be all things to all people, and certainly are keeping value judgments out of this.
I used to be the Chief Asia economist for what is today Merrill Lynch and UBS, and what has remained ABN AMRO. Fine houses, great people to work with. So what I observe below has no hidden agenda. The point is simple: analysts increasingly have to watch their pens and avoid any form of "sell" recommendation - if they want to keep their jobs, that is. This often tainted advice is not good for institutions, but at least they can read between the lines of analysts' recommendations. However, the retail investor, the one whom we are addressing, often cannot read the pea soup of an analyst's somewhat tainted recommendations. We are not insinuating that all analysts' recommendations are tainted; we are asserting that they often have to be just in order to keep the corporate on side for other business.
We explain what is driving broker analysts' declaration of dependence on revenues, why retail investors lose out, and which retail investor can - and which one cannot - earn a bomb or save hospitalization off our site.
Thoughts
On 3rd December 2007, Bloomberg journalists Yalman Onaran and Christine Harper released a trenchant piece, "No Sign of 'Sell' on Wall Street as Analysts say : 'Buy', 'Hold' ". Below we quote the juiciest bits for you to contemplate.
Brokerage commissions have fallen by 25%
Brokers' revenue is getting slammed by technology. Indeed, Instinet opened my eyes when I started treading the path of selling independent research to institutions. "Money managers paid brokerage firms $10.3 billion this year to trade stocks, down from $13.4 billion in 2002, even as trading increased, according to Greenwich Associates. About 40 percent of those fees go to pay for research services, including conferences and trips that allow investors to meet corporate executives.
Revenue pressures forbid independent "sell" recommendations.
Investment bank/broking analysts are under huge pressure to avoid any "Sell" recommendations. In my day, company analysts had to eschew "Sell" because the I-Banks wanted the IPO business. That has not changed. But the two bright Bloomberg journalists now point to another pressure to avoid "Sell": access by fund managers to top leadership at the companies whose stock they hold. Clients want to meet top company executives (in order to get a "true" picture based on their feelings during the meeting). If an analyst issues a "sell" on said stock, his (meaning his or her, apologies, Ladies!) company cannot introduce his clients to said company executive. "Sell" locks the door to corporate access because it antagonizes corporate executives. So the "sell" analyst is locked - out.
"Sell" is verboten
The result is that this year alone, Bloomberg data show that only 7% of all analysts' recommendations have been "sell" - and that is down from a "hefty" 11% last year!
As independents, we have had the great privilege of suggesting a "sell" on the financial sector since late October. Meanwhile, banks analysts at major brokerages have not been able to issue such a warning - even though we all know what beatings most finance sector stocks have taken.
A 'hold" is not a "hold" for retail investors
English 101. What we say is not what we mean - necessarily. If a corporate analyst issues a "hold", an institutional investor can interpret this as a "sell". But according to an article in the Journal of Financial Economics of this August, "... retail investors follow analyst recommendations literally..."
So whom is The Economic Clock™ for?
OK. We are not the only independent website out there, and there are plenty of good ones to choose from. But as in life generally, it's "horses for courses". So which "horse" are we "the course" for - and which not?
We appeal to strategic investors needing a clear and consistent global macro framework. The Economic Clock™ provides a simple, proven framework within which to make your investment decisions. We believe that "getting the right time" is more important than "getting the time right." In other words, I am giving you a strategic timing tool. Yes, The Economic Clock has been flashing "sell" on America for many, many months - also when the market continued rising. Hate to say it, but that prediction now is getting accepted in markets - just watch how the CBOE's "VIX" has been rising - and inversely to America's worsening Economic Time at that! Often our calls are way early - look at when we called US stagflation this May, the fall of the dollar since May 2006, and the myth of de - coupling, for instance. Of course we make mistakes, too, and that is what the Advice Updates, the idea of a particularly bright subscriber, are about. We don't mind being wrong - some people are some times, you know.
We do NOT even want to address traders. My greatest fun was working with traders - in currency, bonds and stocks - in New York, Frankfurt, London and in Hong Kong. Most of these experts are momentum - based, and that comes only from being able to sense what markets are doing. That intuition, in turn, comes from being "on the floor" with other traders - and NOT from being a wannabe trader sitting alone behind a computer screen outside of market locations or indeed market hours.
So, "know thyself" also applies to knowing what type of investment research is for you. Ours is for the strategic investor seeking a fiercely independent, proven framework within which to make or save money. Good luck deciding!
