Cohen vs. Acampora
Market Features: Abby Cohen's
Heavy Halo Starts to Show Some
Tarnish
By Justin Lahart
Senior Writer
9/2/98 4:28 PM ET
Nevermind the market; the
Abby Joseph Cohen myth is
showing signs of cracking.
At midday on Tuesday, Aug. 4, a day when the
market was already falling, Ralph Acampora,
Prudential Securities' widely followed chief
technical analyst, got on his firm's squawk box
and said the Dow Jones Industrial Average could
fall 15% to 20% from its high. The Dow was down
about 140 points when Acampora's call went out.
At the end of the day, it had dropped 299 points
to 8487.
Acampora's call was met with something akin to
derision. He'd kicked the market when it was
down. His flip-flop from the day before, when
his Dow-10,000-by-the-end-of-the-year call was
still in place, showed that he was no more than
a finger in the wind. A grandstander.
It was comments from Cohen, Goldman Sachs'
influential market strategist, the following day
that helped steady the market. Cohen said that
she believed the market had entered the lower
end of a trading range that it had entered in
April, that the market's stair-step pattern
would lead, once again, to an explosive riser.
A month, and more than 600 downside points,
later, Acampora's call seems pretty good. And
there are a lot of people on Wall Street
questioning whether Cohen is really up to the
market-seer status that she's had in the past.
"The way the press and the media treated my
friend Ralph Acampora was horrible," complained
Bill Meehan, market analyst at Cantor
Fitzgerald, a former Pru strategist. "Yet there
have been a lot of other people who have not
made extraordinarily accurate calls [who] have
gotten glowing praise from the press."
This complaint about Cohen, who declined to
comment for this story, is not really new. She
has come under attack in the past for her calls
on small-cap stocks -- with the Russell 2000
down more than 20% this year, her prediction
earlier this year for a small-cap return of 15%
appears unlikely -- and for her commodity
allocations. And indeed, there are plenty of
people who had far more aggressive asset
allocations during this year's rally (Lehman
Brothers strategist Jeffrey Applegate's 75%
stock, 25% bonds asset mix comes to mind). There
have been plenty of people who have made better
sector calls (investors who have followed
Merrill Lynch quant Rich Bernstein's continued
recommendation of high-quality stocks have
profited handsomely).
But that is not the point. Cohen's optimism has
been unwavering since February 1991. Just as
important: Her concept, first formulated in
1992, of stocks moving up in a stair-step
pattern, with periods of leveling out followed
by explosive moves forward. As the major indices
have moved inexorably higher, following the
stair-step pattern perfectly, Cohen was put into
the unfortunate role of market seer.
Now it appears that the market has fallen away
from the pattern, so presciently called by
Cohen, that carried it forward for seven years.
The bull market in stocks is looking shaky. And
criticism of Cohen is getting louder.
"Everyone said Ralph Acampora was crazy when he
said we were in a bear market," said one trader.
"Now everyone is saying Abby Joseph Cohen is
crazy for being bullish."
Many believe that Cohen is basically hemmed into
her position, that because she has become such a
symbol of the bull market, she would send the
market into a tailspin if she even showed
misgivings at this juncture.
"I personally would not want to be in Abby
Joseph's shoes right now," said Meehan. "The
market would be susceptible to a 10% decline if
she came out and said she was nervous or
cautious. In her case, having that much power is
a problem. I see her as having less room to move
than the Fed."
It is indeed a horrible position to be put into.
On the day his call was derided for steepening
the market's fall, Acampora told TheStreet.com,
"I open my mouth and the Dow gets clipped --
it's scary as hell. But, trust me, I don't need
this for my ego." And Acampora, though his calls
are powerful, is still a lesser deity than
Cohen. If Cohen went negative now, she could
bring stocks down so low that to be fair to her
clients and to her job, she would have to turn
around and recommend buying the next day.
There is also a more cynical notion afoot on
Wall Street. The market's downturn comes ahead
of Goldman Sachs' planned IPO this fall, and the
idea that Cohen is under pressure to keep equity
prices up ahead of the floatation has unkindly
been aired more often than it should. If Cohen
continues to view the market positively -- and
it seems very likely that she will -- and she's
proved to be, heaven forbid, fallible, dark
rumors that she had kept her bullish outlook at
the behest of Goldman's management will follow.
This is what happens when a market strategist
becomes a market event -- an almost inevitable
process on Wall Street. It was not just the
accuracy of her portrayal of the market and
steadfast bullishness, which proved right again
and again, that put Cohen into this position.
She has, by all accounts, a high degree of
integrity. She's good with a quote. She still
takes the bus every day from Queens. She is,
when it comes down to it, a good story -- a
story that Wall Street and the media have been
happy to tell again and again, glossing over her
mistakes, making her into somebody that nobody
else is.
With the market off more than 15% from its July
highs, perhaps it is right for people to find
fault with Cohen for not catching the downturn.
If stocks continue to struggle, and Cohen
continues to call them higher, criticism for
that makes sense as well. But the danger is that
she would be demonized -- and casual,
off-the-record comments from several portfolio
managers, strategists and traders suggest that
this may already be happening.
Perhaps at this troubled juncture on Wall
Street, we will finally learn our lesson. We
will gently take Abby Joseph Cohen off her
pedestal and let her go back to being a
hardworking strategist who often, but not
always, gets it right. We will let the pedestal
stand empty as a reminder that nobody really
belongs there, or deserves that kind of pain.
But the reality is that if there were no prophet
for the market, we would invent one. And that is
a damn shame. |
