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Birinyi: We're in Uncharted Territory

Tuesday, 16 Sep 2008 02:48 PM

A few days after saying there wasn't much downside remaining to the market, Laslo Birinyi says investors are moving through previously uncharted financial territory.

"We can make a lot of guesses, but the truth of it is there's no real historic precedent for what we're going through," the president of Birinyi Associates told Bloomberg.

"I would be very leery of anybody who would argue that they could give you a good handle."

"We've done a lot of work on historical patterns and events in the past, but basically, you have a different market with different circumstances and different players," Birinyi notes.

Birinyi, who oversees more than $350 million of investor funds, compares the current market to a centipede.

"We keep waiting for the other shoe to drop, and it drops, but then there's another, and yet another," he says.

"I don't know if we're down to the 65th shoe or the 92nd, but I wouldn't want to put fiduciary monies into the market in anticipation of the end because I really think nobody knows."

The root problem, Birinyi says, is that institutions created financial products they didn't really understand.

"Until we stop allowing everyone with an engineering degree and a computer to create an ETF that may or may not do something, we're still going to have problems," Birinyi says.

Birinyi foresees investment banks will have a much tougher time finding investors from now on.

"People are going to be more cautious and realize that just because someone comes out with a prospectus, it doesn't mean it's been vetted in the real world," Birinyi says.

"And until the mortgages that triggered the current credit crunch start being paid off, the markets will remain bumpy and difficult."

David Oser, chief economist of ShoreBank, agrees with Birinyi's assessment.

"There is so much debt — individual, government, and corporate debt — it just grew and grew and grew," he told the Ventura Star.

"Everything's connected to everything else. It's a real witch's brew."

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A few days after saying there wasn't much downside remaining to the market, Laslo Birinyi says investors are moving through previously uncharted financial territory."We can make a lot of guesses, but the truth of it is there's no real historic precedent for what we're going...
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