The title of Mr. Birinyi's presentation was "The Biggest Inefficiency: The Stock Market". He is the founder and president of a research company bearing his name, Birinyi Associates Inc. He has done equity research and market analysis for most of his Beursanalyse career. His best-known tool is called Money Flows. For many years he was a panelist on Louis Rukeyser's Wall $street Week and was inducted into their Hall of Fame in 1999.
For him Money Flows are not a technical indicator. He eschews all forms of technical analysis saying they do not work. In the spring of 2009 he noted that Money Flows were continuing into the stock markets and suggested a bottom was at hand - good call. From 2011 to the current time, Money Flows have continued though I observed that since the beginning of 2013, the flows seem to lag the market. That is to say the market appears to be running ahead of the flows. Perhaps this speaks to narrower participation in the rally.
He showed several instances where his Money Flow indicator allowed him to make calls regarding the fate of such stocks as GTE and MCI.
At this point he began his assault on technical indicators such as the Advance/Decline line. He views this indicator as being descriptive versus indicative. Likewise he took aim at the Price/Earnings ratio which he described as inadequate. Then he directed his criticism at Dr. Robert Shiller's forecasts. For instance in 1996 when the SP 500 hovered near 750, Shiller told the Fed that the market was wildly overvalued. In 1997 Shiller predicted the market would be 40% lower in 10 years. Shiller's 1996 comments if viewed in 2000 look badly mistaken but in 2002 look closer to the mark. Likewise his 1997 comments are inaccurate if viewed in 2007 though are much more accurate in 2009. These are largely timing issues and I do not believe most Stock reports investors have any sense of short or intermediate term timing, unlike a trader.
He does not believe there are any early or late stock sectors in a rally though if financials lead, it portends a strong rally. To support this point he cited the market rallies of 1962, 1974, 1982, 2002, and the current rally since 2009 as being led by financials.
He then fired a salvo on mutual fund money managers who he believes are uninformed, well-paid and have no incentives. When he was the best performing panelist on Wall $street Week, he was dumbfounded how no one ever asked him about how he achieved success. It is clear Mr. Birinyi is a research purist with a great deal of passion for his craft.
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