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A Bear Explains Himself (kvetches is more like it)

Sunday, January 08, 2006 | 11:45 AM

Normally, I don't do this, but . . . Following the Business Week Year End Predictions, the magazine does a follow up (online) on the high and low forecasts: Mine is: "A Bear Explains Himself".

Okay, let the kvetching begin:

Kvetch #1: Its not the content -- its the tone that has me kvetching. There's nothing wrong with the column per se. I was not misquoted (one line was cleaned up from PG-13 to G). Its just the piece feels "prefab." Change the names, and they could trot it out again next year.

Here's the intro:

"Barry Ritholtz will readily defend himself for taking the most bearish position of all 76 strategists in The BusinessWeek Market Survey. The former chief market strategist for New York City-based Maxim Group calls for a yearend finish of 6,800 for the Dow Jones industrial average, 880 for the Standard & Poor's 500-stock index, and 1,400 for the Nasdaq Composite. That means huge losses -- 36.9%, 29.8%, and 36.9% respectively.

Kvetch #2: Why ignore the numbers for the mid-year call? In the 2006 Business Week forecasts, my 1H projections are:

Dow - 11,800
S&P500 - 1350
Nasdaq - 2620

Hardly "Gloomy."

Incidentally, the reason I make bullish calls before a top (this year and last), is because thats how highs get made -- when markets sprint too high. Got it wrong last year, tried again this year.

I don't know where we finish year end -- nor does it matter much. What does matter is the general direction of the market and how I am postioned relative to that. The 6,800 numbers are a possible (and in my model, a 50/50 probability) target sometime over the next 12-24 months.

But thats just my spin -- they ask for mid-year and year end data, and that's what I gave them. If we see a continuation of the Bull rally, then there's your air pocket. Any subsequent retracement -- mid-year fade -- cranks up the fear levels. While I didn't write this, I can see a top sometime Q1, maybe even late January, to stick my foolish neck even further out.

BINGES TO HALT? Why is he so glum? For starters, globalization and pricing pressures will hurt corporate profitability in 2006, says Ritholtz, who now runs independent research company Ritholtz Research and hedge fund Ritholtz Capital Partners.

Kvetches #3: I am not glum; Hell, I'm a cheerful F-N guy!

"We've been in a stimulus-driven, real-estate-dependent economy for some time now," he says. "As inflation goes higher, and interest rates with it, our consumer-spending binge may slow dramatically."

And the good news? Oil prices will fall, predicts the market watcher, who's now a celebrity blogger. But beyond that, he says foreign stock markets will enjoy most of the action in 2006.

Kvetch #4: eeccchh! Who likes the term Celebrity blogger? (tho I will admit to love being called an emerging blogger by Slate's Dan Gross 2 years ago).

Let's keep the Kvetch-fest rolling:

My numbers for the 2005 forecasts were:

DJIA: Midyear 11,707 Yearend 9,703
S&P 500: Midyear 1,324 Yearend 950
Nasdaq: Midyear 2,620 Yearend 1,825
Russell 2000: Midyear 765 Yearend 606

BW wrote:

This isn't the first time Ritholtz has bid so low. In late 2004, he predicted the 2005 Dow would finish no higher than 9,703. When it topped 10,800 on Dec. 7, William Greiner of UMB Asset Management claimed the winning forecast. But Ritholtz says if that growth had occurred in the first half of the year instead of the second, his call would have been more on target. "We got it backward," he admits.

Kvetch #5: Again, ignores the mid-year forecast;

Kvetch #6: Let me point out that in the last week of April, the DJIA kissed 10,000, the Nasdaq bottomed below 1900, the Russell broke 575, and the S&P500 came near 1125. That's pretty close to my annual low numbers -- and hardly any other forecasters expected anything close to that.

Kvetch #7: "Admit" isn't the word I would choose (but that's a writer's perogative). What I said was:

"I got it exactly assbackwards -- the market sold off the first half of 2005, and then rallied to year end. I thought we could rally 1H, and then sell off."

Kvetch #8: I don't care for the term Bear.

Kvetch #9: I cannot believe I couldn't come up with 10!

: >:

Let me reiterate again: there is nothing inaccurate in the piece, and the quotes are all correct. But the column misses much of what we discussed for 40 minutes (twice) over the phone; the modeling, the market history, the economic details, the variant perception.

That's part of my motivation behind the WSJ econoblog debate, as well as the (now 3 part) Cult of the Bear series (Part I is here, Part II should be out on Monday).

As these things go, they are always more complex than the headlines. I only wished I managed to convey that better in the "A Bear Explains Himself".

Source:
A Bear Explains Himself: NEWS ANALYSIS
Bremen Leak
BusinessWeek, JANUARY 5, 2006
http://www.businessweek.com/investor/content/jan2006/
pi2006015_9422_pi001.htm?campaign_id=nws_insdr_jan6&link_position=link8