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Time Machine Finds Bulls Run Amok at ’07 Stock-Market Top

July 25 (Bloomberg) -- What does a market top look like?

That’s the question on a lot of people’s minds these days, and it’s not an easy one to answer. Almost half the investment professionals surveyed by Bloomberg last week said the equity market is close to unsustainable levels. Bold-faced pundits from Jeffrey Saut at Raymond James Financial Inc. to Leuthold Group Llc’s Doug Ramsey and Tony Dwyer at Canaccord Genuity Group Inc. have called for near-term weakness in stocks.

So on a sunny Friday in July, a perfectly reasonable activity for investors (not to mention columnists low on ideas) is to hop aboard a time machine and travel back to the last major market peak and see if the pundits were warning of impending doom. The Internet Archive’s Wayback Machine allows you to do just that, so buckle up!

The top story on on Oct. 9, 2007, hints at an economic tragedy still in the first act: “Northern Rock Plc, the U.K. mortgage lender bailed out last month by the Bank of England, said the government will guarantee deposits until financial markets become less volatile. The shares rose the most ever.”

However, the deal machine was humming along nicely: Four takeovers totaling more than $10 billion are headlined on the front page. Everything from a light-socket distributor and Turkish shipping firm to a U.K. sewer company are in play.

‘Biggest Trade’

And what about those pundits? A podcast reveals Tom Keene asking Deutsche Bank AG strategist Binky Chadha a tough question: Can stocks go up with so much gloom in the economy?

Stocks will rise so long as there’s no recession, Chadha says, and “the probability is significantly higher than 50 percent that we are not going to have a recession.”

“Is there a specific industry group, category, sector that you find particularly attractive?” Tom asks.

“Right now I think the biggest trade is clearly the diversified financials -- the brokers, Wall Street,” Chadha responds. Chadha is no longer chief U.S. equity strategist at Deutsche Bank. (He’s chief global strategist.)

Another link on the Oct. 9, 2007, home page reveals a video of Jeffrey Kleintop of LPL Financial Corp. telling Bloomberg Television that stocks should keep rallying. He calls for another 3 percent gain in the Standard & Poor’s 500 Index to 1,600 by the end of the year. He indicates growing pessimism is a contrarian buy signal.


“This probably gives us fuel to further this bull a little bit further as investors finally begin to embrace this rally,” Kleintop says.

It’s all so encouraging that readers would be forgiven for leaving the financial sites on Oct. 9, 2007, in search of lighter topics. And boy, the New York Post delivers! Page Six describes how Britney Spears’s sister, Jamie Lynn, rushed to her defense when a Bel Air neighbor screamed at the pop star to “go away.” Poor Britney also missed her first supervised visits with sons Sean Preston and Jayden James and called the police because she mistakenly thought her house had been broken into.

For the most part, the market is a lot quieter than it was then. So is Britney.

To contact the reporter on this story: Michael P. Regan in New York at

To contact the editors responsible for this story: Lynn Thomasson at Jeff Sutherland

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