“If you torture the data long enough, it will confess to anything.”
Darrell Huff, How to Lie With Statistics, 1954
The “Convincers” are getting awfully loud these days. I saw Ryan Detrick, who has been bullish for quite some time, bust out a sample size of 17 first-year of new presidential terms chart today on twitter:
Really? Common sense, if not your college statistics class, should tell you how ridiculously insignificant this is statistically, in more ways than one.
Goldman Sachs is telling their Muppets to hold in May, because….ready for this? Global growth is ramping up! Can they say this with a straight face?
“Returns should be supported by a rebound in global growth, accelerating earnings growth and high-risk premia,” according to the Goldman strategists.
Wow, I need to borrow that crystal ball that they have over there. I actually follow the data and it is getting markedly worse, in both global economic metrics and corporate earnings and revenues. I hope the Chinese Wall wasn’t compromised in any way, as their top institutional clients dump into the pump.
And of course, perma-bull Jim Paulsen gets into the act with a “buy in May and be OK” commentary:
Wow, why does everyone want to convince me to hold or buy in May? Here is a voice (Mark Hulbert) of reason with actual data:
Imagine an earnings season in which total sales revenue increased only miley cyrus pokies photo marginally, while earnings fell. You wouldn’t think that scenario would be greeted with bullish open arms, would you?
Sales growth rates are also coming down: Total sales per share for S&P 500 companies for the last four quarters, for example, are only 3.5% higher than for the comparable period ending March 31, 2012. The comparable growth rate for the period ending the first quarter of 2012 was 9.0%.
So how has Wall Street taken these lemons and made lemonade? By creating low enough expectations that even lemonade is tasting sweet. For example, because of low expectations, some two thirds of the companies in the S&P 500 that have already reported so far this earnings season have beaten expectations.
I don’t really care what pundit opinions are frankly. I am going to let history, seasonality, and common sense guide me. I am always long stocks that I like, but when there is an opportunity to buy puts on the indexes at implied vols that indicate there is little chance the market will head lower into the worst period for stocks, I’m a buyer. I want the market to prove history wrong.
Especially at all-time highs and among a cacophony of folks telling me not to sell.
As tweeted, bought QQQ, IWM, and XLF June puts today, near the highs. Also bought Apr4/May put calendars in AMZN and SBUX. Follow us @VolatilityWiz.
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