THE IDIOT-MAKER RALLY: A Monster Market Surge Is Making These Folks Look Like Fools

Bob Janjuah

Photo: Bloomberg

First of all, we don’t think any of these people are idiots.However, the incredible rally in the stock markets have made the bears and cautious bulls seemingly look like idiots.

Certainly, this is what their clients must be thinking.

Markets have a way of doing this. And this is not the first time that Business Insider has looked at the strategists who missed the mark.

With the recent rally, the Dow Jones Industrial Average reached heights not seen since May 2008, marking, quite literally, a return from the brink.

Although the market only pierced the 13,000 psychological barrier for a few minutes, its steady ascent is in steep contrast to a number of bearish calls by some of the Street’s best known and most vocal strategists, analysts, and economists. 

If you followed their calls and shied away from stocks, we have to say sorry — you missed out on a massive rally. 

JANUARY 2011: Adam Parker of Morgan Stanley Lowers S&P Price Target Drastically

1,167, that's where MS's Adam Parker sees the S&P ending in 2012. 'Our more cautious view on earnings stems from three key factors. 1) We see global GDP decelerating over the next few months in nearly every major geography. 2) Recent company results have been weak...This likely portends weak January results or April guidance. 3) The dollar has materially strengthened against the euro over the last few months and our analysis shows this is highly correlated to earnings downside, with select staples, technology, and materials likely impacted. Furthermore, inventory levels remain crucial, as several industries now have inventory-to-sales ratios well above five-year averages,' Parker said when setting his 2012 target.

Dow Then: 12,221

Dow Now: 12,958

December 2011: Goldman Sach's Economist David Kostin Sees 1100 to 1250 bound S&P 500 for 2012

'Our 3-month, 6-month, and 12-month forecasts are 1150, 1200, and 1250. We use six valuation approaches including DDM, uncertainty-based P/E multiple, cyclically-adjusted P/E multiple, price/book and ROE relationship ... We estimate the S&P 500 could fall by 25% to 900 in an adverse scenario in which the Euro collapses.'

Dow Then: 12,046

Dow Now: 12,958

December 2011: The S&P Will Fall to 579.57, Walter Zimmerman says

December 2011: UBS's Chief Strategist Jonathan Golub Says He Is Would Not Be An Equity Buyer

'We are introducing a year-end 2012 S&P 500 price target of 1,325, based on an 11.9x forward P/E applied to our 2013 operating EPS estimate of $111. This target represents a 6.5% increase from current levels and is built upon UBS' projections of 2.0% and 2.6% U.S. GDP growth in 2012 and 2013, respectively ... While we project the market to rise in 2012, we would not be buyers at current levels and anticipate more attractive entry points in the future. 2012 should again be a struggle between stronger domestic fundamentals and macro risks. Despite recent gestures by central bank officials, we believe that equities will struggle in the face of European recession currently being forecast by UBS economists.'

Dow Then: 12,021

Dow Now: 12,958

December 2011: Richard Russel, Quite Eloquently, Says To 'GET OUT OF STOCKS'

'I am warning all my subscribers again that we are back in the grip of a vicious and ruthless bear. The bear has been held back for almost two years, due to the so-called quantitative easing of an anxious and ignorant Fed. There's no bear angrier than a frustrated bear. As a result, I believe we're going to see a brutal stock market that will shock the Fed and the bulls and the public -- and all who insist on remaining in this bear market. I think we'll see selling of gold to cover losses (particular losses by the short sellers), but ultimately gold will be the last man standing. But most important -- GET OUT OF STOCKS.'

Dow Then: 11,825

Dow Now: 12,958

December 2011: Barry Knapp of Barclays Capital Sees Tremendously Difficult First Half of 2012

'We expect a difficult range bound 1H12, with 1150 our expected value around mid- year. Equities should fare better in the back half as the economic fallout in Europe dissipates and the U.S. election becomes priced, leading to a late year rally,' Knapp said.

Dow Then: 12,022

Dow Now: 12,958

November 2011: Barclays Capital Had Another Bear, Technical Analyst Jordan Kotick Who Believed The Market Was Completely Broken

Barclays' technical analyst Jordan Kotick pointed too a bunch of ominous technical breakdowns in note he distributed in early November.

Dow Then: 11,780

Dow Now: 12,958

October 2011: Nomura's Bob Janjuah Says A Fall To 700 Is Completely Possible

'My last report (Bob's World: It's only just begun) was published on 23 August. A month on I have little to add as markets and data are evolving almost exactly as expected. Most commentators now seem to accept that what is happening is not an overreaction, rather the markets are at last on the way to fully pricing in the sad state of the global economy and global markets. It may sound repetitive, but I remain firmly convinced that we are in a secular bear market where stage 1 was the late 2007 to early 2009 sell-off, stage 2 was the countertrend rally from early 2009 to April 2011, and stage 3 is the current phase, where I expect the sell-off to last at least until late 2012 ... It is for these reasons that my secular view remains bearish. In or within a year from now I expect global equities to be 25% to 30% lower. My S&P500 target for the low in 2012 remains 800/900, and I think an 'undershoot' into the 700s is entirely possible.'

Dow Then: 10,912

Dow Now: 12,958

October 2011: John Hussman Calls A Recession And Says The European Mess Has Barely Gotten Started

'The simple fact is that the measures that we use to identify recession risk tend to operate with a lead of a few months. Those few months are often critical, in the sense that the markets can often suffer deep and abrupt losses before coincident and lagging evidence demonstrates actual economic weakness. As a result, there is sometimes a 'denial' phase between the point where the leading evidence locks onto a recession track, and the point where the coincident evidence confirms it. We saw exactly that sort of pattern prior to the last recession. While the recession evidence was in by November 2007 (see Expecting A Recession ), the economy enjoyed two additional months of payroll job growth, and new claims for unemployment trended higher in a choppy and indecisive way until well into 2008. Even after Bear Stearns failed in March 2008, the market briefly staged a rally that put it within about 10% of its bull market high.'

Dow Then: 11,643

Dow Now: 12,958

October 2011: Nouriel Roubini Says A Recession Will Happen, And The Only Question Is Whether It Will Be Mild Or Severe

'Certain key commodity markets were not yet fully pricing in the rising risk that a number of advanced industrial countries, including the U.S., could face a double-dip recession. Roubini said that he was assigning a 66% probability to the likelihood that some European economies and the U.S. would report economic contractions in the medium-term future,' he said in September, before commenting in October that Europe was headed for a double dip. 'The question is not whether or if there is going to be a double dip, but whether it's going to be mild or severe with another financial crisis,' Roubini told CNBC. 'The answer on that depends on the euro zone.'

Dow Then: 10,771

Dow Now: 12,958

September 2011: Mary Ann Bartels Says The S&P Will Drop Below 1000

'Unfortunately, nothing in our work suggests that the market is improving,' Bartels said in September. 'More importantly, we are more concerned now that the downside risk could be more than we originally forecast. Measured moves suggest 985-910 on the S&P 500 is a potential range where a market bottom may finally be found.' But in December she reiterated her bearish view, doubling down on a downturn in 2012. 'This pattern is becoming eerily similar to 2008 into 2009. A base building process has been underway since August but we have maintained the belief that the lows still need to be tested and undercuts to 985- 935 are possible (50% probability) as part of this process. We expect a new cyclical bull market to emerge near 2Q12. Time and patience are needed.

Dow Then: 10,990

Dow Now: 12,958

September 2011: Albert Edwards Remains Completely Bearish, Predicts A 65% Sell Off

'We still hear a lot of nonsense about equity valuations and I certainly don't like feeling left out. Our belief that US equities are still overvalued is based on Tobin's Q, Shiller, Graham & Dodd's and cyclically adjusted PE measures. Investors ignore these at their peril. Those who take reassurance that the current 12m forward S&P PE of 101⁄2x is cheap should take a look at the chart below. The forward PE may be back down at the same level as the low of the last bear market, but 1) we are on peak earnings, and 2) the Ice Age secular trend of lower PE lows in this secular valuation bear market will mean that we move to single-digit PEs in this, the third post-bubble recession. Those who do not believe this can happen are still choosing to ignore the reality that has unfolded before their eyes since 2000. In phase 3 of the Ice Age we would apply a 7-8x forward multiple to recession-depressed forward earnings of say $70-75/sh. That gets us pretty close our 400 S&P target. Unbelievable and ridiculous? They said that about our 11⁄2% US T-Note forecast this time last year!'

Dow Then: 11,152

Dow Now: 12,958

August 2011: John Mauldin Commits To His Recession Call, Saying Stocks Could Fall 40 per cent Over Coming 12 Months

'Last week I finally stopped being wishy-washy (with my 50-50% chance of a recession call) and said the U.S. would be in recession within 12 months. And suggested that you consider moving to the sidelines your longer-term equity investments, except your conviction stocks. (I have some of those in the biotech space and simply intend to buy more if the prices go down. But remember, I am looking out 10 years and expect an eventual bubble, so I don't care if I am early for some of my high-risk money.) Stocks typically go down about 40% or more in a recession.'

Dow Then: 11,284

Dow Now: 12,958

The 2011 Idiot-Maker Rally Edition

Like we said, these were not the only bad calls strategists have made,
Take a look at the 2011 edition of the Idiot-Maker Rally >

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