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Book Review: The day the market roared


The day the market roared: the way the 1982 forecast created a global bull market. 2021. Henry Kaufmann with David B. Cecilia. Matt Holt’s book.


The title of a recent book by Henry Kaufman focuses on a single date, August 17, 1982, but the content is much broader. Kaufman recounts his personal history, from fleeing Nazi terror with his family in 1937 to his year at the age of nine as head of research at the Solomon Brothers. Closer to the conclusion of the volume, he discusses the market impact of the COVID-19 epidemic.

Writing with business historian David Cecilia, a University of Maryland businessman, Kaufman showed that he was an innovator in financial market analysis, highlighted by his pioneering use of fund-of-fund data to create interest rate forecasts.

Involved in this narrative, Kaufman argues that the transition from Wall Street partnerships to corporations undermines research freedom. He also lamented the increased concentration of the U.S. financial industry. Between 1990 and 2000, he reported, the proportion of financial assets held by the 10 largest financial institutions increased from about 10% to at least 80%. Other trends that concern him include declining corporate credit standards and a widespread redefining of liquidity that has the potential to easily convert cash into assets. Along the way some scores are settled with John Gutfrund, chairman of some Solomon Brothers, as well as a prediction that rating agencies will downgrade the U.S. government.

The focal point of the book, however, is a brief account of the day in which Henry Kaufman revised his interest rate outlook to the S&P 500 index and the biggest one-day rise in the DJIA. Prior to that ceremony, he was dubbed “America’s Interest Rate Guru.” Institutional investors And “Dr. Doom,” apparently by New York Post, Which Kaufman describes as “designed for impatient people with more significant paperwork.” The first nickname acknowledges its enormous influence among institutional investors, while the latter mocks him for steadfastly adhering to his view that an increase in the federal deficit would lead to an increase in interest rates. His determination also turned out to be a death threat. Kaufman has been named in a list of prominent people targeted by the FBI for the murder of a terrorist.

Image tiles the basis of high yield analysis

As Kaufman unhesitatingly admits, interest rate trends had already turned positive 10 months before the reverse market roared. 1 August 2 No other news of August 1 could give an account of the colorful rally of that day. Prices have risen largely on the basis of merit, such as information strictly defined by financial economists. The only thing that changed was a man’s opinion of previously known information.D In short, the event qualifies as an efficient market hypothesis (EMH) inconsistency.2

Die-hard EMH followers can comfort themselves with the thought that all this happened four decades ago and probably won’t happen today. As Kaufman refers to:

“The way economic and investment data has reached Wall Street has already changed significantly over the last forty years, which may be another reason why no private sector individuals can roar (or collapse) markets to the same extent.”

At the level of personal security, however, it is now common not to raise prices on anything that could be considered new basic information, but instead to respond to people’s revised interpretations of previously published information. To give a representative example, on March 25, 2021, Cisco Systems (CSCO) shares rose 1.7%, while major stock indices rose only 0.1% -0.6% and technical stocks retreated. Multiple media outlets have blamed Goldman Sachs analyst Rod Hall for CSCO’s remarkable performance in upgrading from hold to buy. At least one reporter further mentioned that Everco’s ISI has raised its CSCO target price from 54 54 to 58 58, but this reviewer did not find any article that mentions any event of 25 March 2021 promising to increase the company’s future revenue.

Book jacket in the history of financial markets: a reflection of the past for investors

Rarely is a book displayed without a single mistake. The day the market roars Incorrectly included Ayn Rand, who came to the United States in 1926, “among European intellectuals … who immigrated to the United States during or after World War II.” William Miller “and (correctly)” businessman G. Referred to as “William Miller.” (One-time Textron CEO, by the way, began his career as a lawyer.)

Despite the minor flaws in the book, investment professionals can benefit from this page-turner’s over 60 years of view of the financial markets. As a bonus, the book provides an underlying perspective on the history of Wall Street, which is a significant public interest in Kaufman. Particularly enjoyable are the affectionate portraits of his prominent mentor and colleague Solomon Brothers, as well as his first Boston rival and friend Albert “Dr. Death” Wojnilower.


1. Even more significantly, about a month before the day of the market boom, New York Daily News Reported that a Rumors That Kaufman initiated the one-day rally by revising his interest rate outlook.

2. “What is the investment value recommended by brokerage analysts?” Kent L. Brokerage firms spend hundreds of millions of dollars annually analyzing stocks and trying to convince investors that certain stocks are more or less attractive than others. . . . Market prices may not fully reflect all available information, otherwise data collectors will not receive any compensation for their costly activities.

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All posts are the author’s opinion. As such, they should not be construed as investment advice, or the opinions expressed must not reflect the views of the CFA Institute or the author’s employer.


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Martin Fridson, CFA

According to Martin Fridson, CFA New York Times, “One of the most thoughtful and perceptual analysts on Wall Street.” He was named Financial Executive of the Year in 2002 by the Financial Management Association International. In 2000, Fridson became the youngest person ever to be inducted into the Permanent Income Analyst Society Hall of Fame. He has worked as a guest lecturer at the Bacon, Columbia, Dartmouth, Duke, Fordham, Georgetown, Harvard, MIT, New York University, Notre Dame, Rutgers and Wharton, as well as graduate business schools at the Amsterdam Institute of Finance. Fridson’s writings have been widely praised for their humor, rigor, and usefulness. He has a BA in History from Harvard College and an MBA from Harvard Business School.



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