Pundit Failure: We Are in a Bear Market and This Is a Recession

by: Reggie Middleton

Most companies will continue to underperform for several quarters relative to 2006 performance. If you have been following my blog since it started in September, you will probably see where I am coming from.

Blog post date Companies Negatively Blogged Price as of Blog Date or following trading day 2/8/2008 % change
1-Sep-07 len $28.37 $19.18 (32.39%)
hov $12.60 $9.00 (28.57%)
phm $16.91 $14.73 (12.89%)
ctx $29.08 $23.95 (17.64%)
dhom $2.08 $0.59 (71.63%)
1-Sep-07 bzh $11.19 $7.91 (29.31%)
rdn $18.11 $8.79 (51.46%)
mtg $30.34 $15.88 (47.66%)
1-Sep-07 dhi $15.23 $15.04 (1.25%)
tol $21.84 $21.18 (3.02%)
bsc $113.84 $83.03 (27.06%)
cfc $19.59 $6.84 (65.08%)
3-Sep-07 mbi $61.58 $14.20 (76.94%)
abk $64.15 $10.96 (82.92%)
8-Sep-07 wm $34.06 $18.58 (45.45%)
16-Oct-07 ryl $23.96 $28.79 20.16%
8-Jan-08 ggp $45.75 $37.94 (17.07%)
19-Dec-07 ms $49.79 $44.88 (9.86%)

I post this to illustrate the damage that can be done by following talking heads in the popular media and even most sell side analyst reports. Most of the companies and sectors above have been rated buys by analysts (ex. Stephen Kim at Citibank) and strategists I hear on CNBC, arguably the most popular financial station in the world.

Now, if you were short these stocks, you can multiply the % change by about -1.9 to see what the result would be after expenses. If you were long these stocks in cash, that bright red row on the right of the table would have been your fate, if you were long on margin... Beware and be wary of what you read and hear in the media and sell side analyst reports. Blogs can be dangerous as well, but there are a few of us that blog just to blog and have outstanding content - not necessarily fit for investment advice (as I continuosly warn in my blog about my content), but phenomenal in the form of educational fodder. My Blog Roll has some of my favorites.

I challenge any and all sell side analysts and media pundit who dismiss blog content to post a running tally publicly. I, unfortunately, cannot post any investment results for fear of giving the impression of offering advice or holding myself out to the public, but those that can are welcome to do so, and the blogoshpere can judge empirically. I don't want to mention any names, but I think it is a shame that certain individuals and institutions that are so well respected and followed give such horribly performing advice, day in and day out.

Here is a pundit performance tool that can allow you to follow and compare performance to the short side as well as the long side (I figure the long side is simple enough that you don't need a spreadsheet). I took my blog's performance out of it so there is no representation of performance, but you can fill it in with that of the pundits you may have a doubt about.

zip blog_and_pundit_tool 2.05 Mb (.zip file)