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Charles Biderman (TrimTabs) Explains Why He’s Bullish at Trader’s Narrative

After raising a ruckus earlier this year about the “mysterious” source of money flow into the stock market, Charles Biderman of TrimTabs is going around the media trying to explain why he is now a bull. Personally, I’d like to see his feet being held to the fire more about that hilariously bad tin-foil hat conspiracy allegation. The few times that he has been asked about it, he shrugs it off as if it is absolutely normal to make extraordinary claims without a shred of evidence to back them up.

In any case, the whole debacle has done considerable damage to his reputation to say nothing of the fact that he remained staunchly bearish for a whole year, missing a +70% move. Based on his previous calls, this is a bit uncharacteristic. Biderman was able to ride most of the 2003-2007 bull market and he did in fact become bearish in late 2007.

Biderman explained to Barron’s in a recent interview that he is now bullish based on the demand and supply of stocks. According to TrimTabs, the stock market can be measured based on supply and demand for stocks. There are a few sources of supply and a few sources of demand. TrimTabs monitors these and attempts to come up with a balance of where things stand. Right now they are seeing companies buying back their stocks, thereby restricting the existing float. As well, the number and size of IPOs is still very light, adding to the restricted supply of stocks.

In the Barron’s interview Biderman also mentions that XLP, the consumer-staples ETF is showing the most shrinkage in float and XLF, the financial ETF, the biggest increase in float as large banks repair their balance sheets by issuing stock. Like me, he is wary of the insatiable appetite of retail investors for bonds, believing that we could see a blow-up in the bond market. You can read the whole article here: Q&A: Treating Stocks Like Commodities

Biderman was also interviewed by CNBC where he touched on the massive flows into the bond market and the non-participation of the retail investor in the equity market. It is a bit early to talk about the April mutual fund and money flows but according to historical seasonal patterns, April is a very strong month for equity mutual fund inflows.

Last year while the whole year itself saw outflows of $36 billion, April 2009 had an inflow of $10 billion. And a year before that, in 2008 while we saw a record outflow for the whole year as the bear market mauled portfolios, April 2008 saw an inflow of $6 billion. So this could give the market a short term boost as money managers put that money to work. Biderman believes that this could create a short term top.

More importantly, he mentions that tax collections are increasing - which can be attributed to more people being hired or higher incomes. For a long time TrimTabs would rail against the inaccuracies of the BLS non-farm payroll report - because of overstatements. But based on income tax collections TrimTabs estimated March’s numbers at 280,000 where the actual numbers were 162,000.

nonfarm payroll long term chart of the day Apr 2010
Source: Chart of the Day

This is bullish up to a point, as we looked at yesterday, once the tax collections goes above a certain level, it is actually bearish for the market: Lower Tax Collections Are Bullish.

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2 Responses to “Charles Biderman (TrimTabs) Explains Why He’s Bullish”  

  1. 1 Fibocycle

    Interesting…CB’s outlook on reality is always interesting–sometimes perplexing–sometimes paradoxical–but ALWAYS entertaining.

  2. 2 tom brakke

    Being a pundit means going on to the next forecast no matter how the last one did.

    By coincidence, exactly two years ago today I was at a meeting with Biderman, at which he called the bottom of the real estate market. While he pointed to a number of indicators, the crux of his case was that he had tried to buy several California houses (with cash) at beaten-down prices and was outbid on each. His thesis was that if the worst market was rebounding, the “all clear” could be sounded.

    Instead, as we know, the hammering was about to intensify, as the problems in California not only weren’t over, but they spread to other areas of the country that hadn’t been hit much to that point.

    This prediction may be better, but as with all of them (from anyone), it should be taken with a huge grain of salt.

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