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Laszlo Birinyi Says Buy-and-Hold Isn't Working in U.S. Stocks
By Lynn Thomasson and Betty Liu
June 26 (Bloomberg) -- Buying and holding U.S. stocks is ``very treacherous'' because share prices are swinging too much, Laszlo Birinyi, president of Birinyi Associates Inc., said.
``Investors are going to be disappointed and quite frankly fed up with this volatility,'' Birinyi, who oversees more than $350 million in Westport, Connecticut, said in an interview on Bloomberg Television yesterday. ``This is a market you have to trade. It's not a market where you can buy and hold.''
The Standard & Poor's 500 Index today extended to six days a streak in which it has alternated between gains and declines, losing 1.8 percent to 1,297.67 as of 11:05 a.m. in New York. The Chicago Board Options Exchange Volatility Index, a gauge of expected swings in the S&P 500, rose 9.5 percent, bringing its gain for June to 30 percent.
General Motors Corp., the largest U.S. automaker, dropped 11 percent to $11.37, the lowest in at least 46 years. Three- month implied volatility for GM options rose to the highest level in since 2005 this week, according to data compiled by Bloomberg. Volatility in Ford Motor Co., the second-biggest U.S. automaker, reached the highest in three months, the data show.
GM and Ford may be better able to do business under Chapter 11 protection, short-seller James Chanos of Kynikos Associates Ltd. said yesterday on Bloomberg Television.
``One of the better things these companies could do is go bankrupt,'' said Chanos, whose mostly bearish hedge fund bet against Enron Corp. in 2001 prior to its bankruptcy. ``I am not saying liquidate, but go bankrupt and reorganize. Then they would have a fighting chance.''
Working Capital
GM had a working capital deficit of $10.9 billion at the end of the first quarter, while Ford's was $9.04 billion, according to data compiled by Bloomberg. Chanos said the companies' working capital positions are ``dire'' and that investors focusing on their cash balances are being misled.
``We don't agree with that,'' Ford spokesman Mark Truby said. ``We have strong liquidity and our total focus is implementing our plan to transform Ford to a lean and profitable global enterprise.''
Renee Rashid-Merem, a spokeswoman for GM, didn't respond to a request for comment.
Soaring gas prices, consumer confidence at the lowest since 1992 and tighter credit conditions will weigh on auto-industry profits, Goldman Sachs Group Inc. wrote in a report today. GM may need to raise money and cut its dividend as its cash flow deteriorates, the analysts wrote.
Chanos also said Kynikos is short Raymond James Financial Inc., the biggest U.S. regional brokerage, because of ``very aggressive'' loan growth at its banking unit.
`Buried'
``A lot of people don't know about Raymond James Bank, buried within a regional brokerage firm,'' Chanos said. ``Raymond James Bank has been a very aggressive lender at the wrong time in the cycle.''
Raymond James Financial, based in St. Petersburg, Florida, rallied more than 18 percent on April 23 after second-quarter profit beat analysts' forecasts. Revenue at the bank unit surged 86 percent to $105.1 million in the period, the company said.
Total net loans at Raymond James Financial were $6.18 billion on March 31, up from $3.01 billion a year ago, according to the company's earnings release. Reserves for loan losses of 1.24 percent of balances are ``adequate to subsume'' future defaults, the company said in a statement.
``This loan portfolio is regularly reviewed both internally and by regulators, auditors and a contracted third party,'' said Chief Financial Officer Jeffrey Julien in response to Chanos's comments. ``While we anticipate some credit problems, particularly in the residential homebuilder space, we expect these to be relatively modest in number and size.''
By Lynn Thomasson and Betty Liu
June 26 (Bloomberg) -- Buying and holding U.S. stocks is ``very treacherous'' because share prices are swinging too much, Laszlo Birinyi, president of Birinyi Associates Inc., said.
``Investors are going to be disappointed and quite frankly fed up with this volatility,'' Birinyi, who oversees more than $350 million in Westport, Connecticut, said in an interview on Bloomberg Television yesterday. ``This is a market you have to trade. It's not a market where you can buy and hold.''
The Standard & Poor's 500 Index today extended to six days a streak in which it has alternated between gains and declines, losing 1.8 percent to 1,297.67 as of 11:05 a.m. in New York. The Chicago Board Options Exchange Volatility Index, a gauge of expected swings in the S&P 500, rose 9.5 percent, bringing its gain for June to 30 percent.
General Motors Corp., the largest U.S. automaker, dropped 11 percent to $11.37, the lowest in at least 46 years. Three- month implied volatility for GM options rose to the highest level in since 2005 this week, according to data compiled by Bloomberg. Volatility in Ford Motor Co., the second-biggest U.S. automaker, reached the highest in three months, the data show.
GM and Ford may be better able to do business under Chapter 11 protection, short-seller James Chanos of Kynikos Associates Ltd. said yesterday on Bloomberg Television.
``One of the better things these companies could do is go bankrupt,'' said Chanos, whose mostly bearish hedge fund bet against Enron Corp. in 2001 prior to its bankruptcy. ``I am not saying liquidate, but go bankrupt and reorganize. Then they would have a fighting chance.''
Working Capital
GM had a working capital deficit of $10.9 billion at the end of the first quarter, while Ford's was $9.04 billion, according to data compiled by Bloomberg. Chanos said the companies' working capital positions are ``dire'' and that investors focusing on their cash balances are being misled.
``We don't agree with that,'' Ford spokesman Mark Truby said. ``We have strong liquidity and our total focus is implementing our plan to transform Ford to a lean and profitable global enterprise.''
Renee Rashid-Merem, a spokeswoman for GM, didn't respond to a request for comment.
Soaring gas prices, consumer confidence at the lowest since 1992 and tighter credit conditions will weigh on auto-industry profits, Goldman Sachs Group Inc. wrote in a report today. GM may need to raise money and cut its dividend as its cash flow deteriorates, the analysts wrote.
Chanos also said Kynikos is short Raymond James Financial Inc., the biggest U.S. regional brokerage, because of ``very aggressive'' loan growth at its banking unit.
`Buried'
``A lot of people don't know about Raymond James Bank, buried within a regional brokerage firm,'' Chanos said. ``Raymond James Bank has been a very aggressive lender at the wrong time in the cycle.''
Raymond James Financial, based in St. Petersburg, Florida, rallied more than 18 percent on April 23 after second-quarter profit beat analysts' forecasts. Revenue at the bank unit surged 86 percent to $105.1 million in the period, the company said.
Total net loans at Raymond James Financial were $6.18 billion on March 31, up from $3.01 billion a year ago, according to the company's earnings release. Reserves for loan losses of 1.24 percent of balances are ``adequate to subsume'' future defaults, the company said in a statement.
``This loan portfolio is regularly reviewed both internally and by regulators, auditors and a contracted third party,'' said Chief Financial Officer Jeffrey Julien in response to Chanos's comments. ``While we anticipate some credit problems, particularly in the residential homebuilder space, we expect these to be relatively modest in number and size.''
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