Investing Caffeine

Words of Wisdom from the Money Flow Master

September 10, 2009 at 4:00 am Leave a comment

When Laszlo Birinyi talks, people should listen. Laszlo Birinyi, President of Birinyi Associates, has seen a lot in his days on Wall Street and he has the gray hair to prove it. Mr. Birinyi joined Salomon Brothers in 1976 with the job of developing products and analysis for the firm’s clients and traders. In 1989, after departing Salomon Brothers, Mr. Birinyi left to form Birinyi Associates where Bloomberg LP became a key client for a variety of equity functions.

Mr. Birinyi made the concept of “money flow” – a price direction indicator based on supply-demand trade volume data – a key pillar for his clients’ research. Having lived through and studied many market cycles, Mr. Birinyi tries to take the emotion and misleading media headlines out of the investment decision making process. The “wall of anxiety” is very normal to be present in market cycle bottoms, but the market is always looking ahead. Rather than listen to the talking heads on television, Mr. Birinyi chooses to listen to the market statistics. The current market thinking is that we’ve come too far, too fast, therefore we are positioned for an imminent 10% pullback. Laszlo Birinyi calls the correction speak nonsense and highlights the limited data to support these claims.  Mr. Birinyi begs for bears to “Give me the evidence…in 1982 we went 424 days before we had a correction. In 2000, we went seven years before we had a 10% correction. In 2002, we went three or four years.”

CNBC Interview With the Money Flow Master

Click Here To View CNBC Interview

The bear case always sounds more intelligent, but based on his views into his crystal ball, Mr. Birinyi sees the S&P 500 hitting 1,700 over the next few years (approximately a 70% increase from current levels). What I like about Birinyi’s process is that it’s a strategy based on taking out emotions and following objective data – the strategy is not driven by witty, bearish media sound-bites.

I can’t objectively verify Laszlo Birinyi’s performance; however I can understand his sound, sage advice because his philosophy is based upon objective historical statistics and data, not on the whims of the skittish masses. Birinyi has been around for decades but in the coming weeks and months we’ll discover if the 10% correction boogeyman will spook him or not.

Entry filed under: Profiles. Tags: 10% correction, Birinyi, Birinyi Associates, cnbc, Laszlo Birinyi, money flow, Salomon Brothers.