When Barry Ritholtz Talks, People Listen

At about 8:30 a.m. yesterday, Yahoo!’s Tech Ticker posted an interview with Barry Ritholtz, noted finance guy and blogger. In recent times, he has also been very bearish on the market.

But he thinks the bottom may be near. Here’s his money quote from the interview: “There’s a big bear market rally coming.”

Seven and a half hours later, the Dow had risen 5.8 percent.

So was this a case of causality, or merely correlation?

Probably about as much causality as the typical explanations of stock-market movements. If there really was a specific reason behind yesterday’s spike, it probably had to do with Citibank, not Ritholtz.

But given his excellent timing in this case, I wouldn’t be surprised if a lot of people got out their wallets the next time they hear him speak.


Ken B

Here's some Freakonomics for you: one possible reason for Citigroup's better results may be a continuation of the usury that got us into this mess. Millions of their credit card customers received notice a few months ago that their APRs would be increasing to 20%, 25% and even 29% unless they opted out by closing their accounts. This was being done to customers who've never been delinquent, over limit, etc., and with good credit scores.

Presumably many of their solvent customers did opt out, leaving only the most desperate ones who are now paying loan shark APRs and are thus even closer to bankruptcy. I phoned their customer service to complain and to my surprise they readily rescinded the increase, leaving my APR at 8.15% instead of 29%.

Matt

Agree with Ken B. I hold two citi cards, have excellent credit, and just saw my rates jump from 6%/8% to 15%/17%. Called with alarm and wastold that all holders were increased. I did not get the reduction that Ken received, but I didn't push it as I had already moved my balance off of my Citi cards (and should have it paid off by May, woo!).

Kent

I'm a regular reader of Barry's blog and the timing was pretty funny. I wish the government would listen to him about his recommendations on the bailout, TARP, AIG, etc.

Mike P.

An internal memo is 'leaked', in which Pandit says, well, ignoring all the losses and charge-offs, Citi is making money.... and the market goes wild?!?!?!

BWAHAHAHAHAHA! The best part is, he can't be held liable for anything. Internal memos aren't regulated by anyone, and he can say anything he wants.

You know, I have $1 million dollars in my checking account right now, minus the amount of $1 million I don't have...

deriuqer

I told my wife in the beginning of September: "Honey, those investment banks... It doesn't look good..." Next thing you know -- Lehman goes belly up. I am pretty sure I caused this because my wife has a lot of friends and likes to talk, so it must have been self-fulfilling.

Colin

As a trader, I love Ritholtz's site. The guy doesn't predict, he looks at the same thing all us traders do. There's a certain structure to the market, and he definitely had an edge in predicting a bear bounce.

Even he's laughing at the poeticalness though. His idea was solid, and most traders would agree.

kahlia

I'm in the same boat as Ken B. and Matt, my "fixed 7.99% for as long as you hold the card" suddenly went up to a VARIABLE 14.99 (without notice). They did lower it again as soon as I asked -- and credited my account for the days it was billed at the increased rate --, but said that by "rejecting the new terms", the card cannot be renewed and when the current card expires I'll have to get a different one.
Luckily, I have a year and a half to shop around! ;)

Chris

The skill set required to be a successful blogger and/or market pundit is very different that what is required to be a successful hedge fund manager.

I have been invested with Barry for about 3 years now, and the performance of the fund that I am in is not very impressive at all considering the following he has.

At times I wonder if he is devoting more of his attention to his blog and media appearances than his money management business.

Barry Ritholtz

Thanks for the compliment -- too bad its more correlation than causation.

We recorded that on Monday afternoon, and they posted it early Tuesday. But if you looked at the US Futures market, you can see they were very strong once Asia opened up big.

Chalk it up to fortuitous timing more than anything else . . .

Note: This was A bottom; whether its THE bottom has yet to be determined.

Matt

I also noticed on today's citi statement that my due date has advanced by a week.

James

I posted this earlier and sincerely hope that this cite is censoring dissenting points of view.

I loved Mr. Dubner's book but I find the laudatory tone towards Mr. Ritholtz's stock market predictions missplaced.

Over the past five years, he placed 59th out of 60th (bottom) in a review of yearly predictions done by Business Week and CXO Advisory.

http://www.erictyson.com/articles/20090207

Ritholtz

The CXO data was incomplete and not updated -- the Dow 6800 forecast they had as wrong (and a year earlier, it was)

They have since updated their data. Have a look

Brad Swain

interesting post since you guys just posted this cartoon
http://freakonomics.com/2009/03/09/correlation-vs-causality-the-cartoon-version/

I also don't see why Citi has must to do with an over all bounce. Give me some money at Zero interest and I'm sure i could turn out a small operating profit too.

These claims are getting more and more ridiculous, more on that here www.inferiorpolitics.com

Barry Ritholtz

A few clarifications:

First, Fusion has been managing money for 2 years. Whoever claims to have an account with us for 3 years is misinformed. (There are numerous funds on our platform but other managers run them, not me)

Second, I have long said forecasts are folly, and predictions are for fun, not for profit. Guessing where the market is going to be 12 months from now is just that -- a random guess. See this for more details: http://www.thestreet.com/_tscana/comment/barryritholtz/10226887.html

Related tot hat is the CXO stuff. Its kinda weird. Aside from rewarding groupthink -- just add 10% to the year's close and be safe -- they pulled only 3 years (not 5) from the Businessweek annual forecasts, ignored other elements there that were very good (sector picks, stock picks etc.) As these things randomly go (a little mean reversion), the next year (2007) I was at the top of the heap, and of course, Businessweek didn't run its full annual forecast.
It ran in the WSJ instead. See this.
http://online.wsj.com/article/SB116671139892256725.html

and

http://www.ritholtz.com/blog/2008/01/media-appearance-cnbcs-squawk-on-the-street-11008/

In 2008, I was the most bearish in the group -- and was still too bullish by 4000 points.

But all of the above misses the real issue: Is the commentary insightful? Is it ahead of the curve? Can you learn things you don't find elsewhere? Can it help to make you money?

If the answer to those questions are yes, then you will find the blog to be of value.

Read more...

Raven

Phil Davis (Philstockworld) was on TV and called it on the 6th.

http://www.philstockworld.com/2009/09/10/stock-market-crash-year-one-review-iii-march-madness/