Charles Biderman, president and CEO of investment research firm TrimTabs, started his career as a stock margin clerk at Francis I. du Pont & Co.
"It was the only job I could get with a BA from Brooklyn College," he says. "The only way to get into the front office was to get an MBA," so, naturally, he went to Harvard Business School.
Following his graduation from Harvard Business School, he started working with short sellers and shorting the real estate market in the mid '70s. In 1975, he bought 1,000 apartment units, two office buildings and six shopping centers from bankrupt REITs. Unfortunately, in 1987, he got caught in another real estate crash and started TrimTabs in 1990, recommending investors short banks that were stuck with a lot of bad real estate.
TrimTabs provides real-time data on the supply and demand of stocks and money available for investment, Biderman says. "All there is in the stock market are shares of stock, and since 80% of stock is owned by institutions, we track money flows in and out of institutions. We also track real-time data on income tax collection, because the most influential factor in money available for investment is income."
The company's efforts have attracted the attention of the Bureau of Labor Statistics and the Bureau of Economic Analysis. "We've had a five-year long fight with the BEA and the BLS," Biderman says, "because they don't like the fact that we say they only use surveys and they ignore the real-time data available in income tax collections because that means they would be out of a job." For example, in the first quarter of 2011, TrimTabs said the economy was growing faster and there were more jobs being created than the BLS or the BEA was saying. Two months before our interview, Biderman says, they revised the first-quarter numbers to figures similar to TrimTabs' estimates.
For advisors, the "volatility of investing in a rigged market" will present a major challenge over the next year. "The Federal Reserve has admitted that it is concerned about maintaining and supporting asset prices," Biderman says. "At some point, that will end. Either the economy recovers and the rigging of the market ends," he says, adding that "it probably still will be a nasty decline. Or worse, the economy doesn't recover and they continue to rig more and more, and the eventual decline will be much, much more severe."
"Navigating the unfixing" of the market, Biderman says, will be a challenge advisors have to face, "however it occurs."
