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

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.

blog_and_pundit_tool 2.05 Mb (.zip file)

Comments

[brooklyn91941:]

Reggie:

I read your blog everyday and your analysis is right on and first rate. CNBC and the other talking heads have to be bullish all day every day, and by and large no nothing. Just remember for most of my career on wall street there was never a sell rating on any stock for fear of being shut out of invetment banking revenue. That holds true today and also holds true for the financial shows. If it wasnt true people like Larry Kudlow, Ben Stein and most of the anchors would never be on the air.

Keep up the good work. The Blog world will change the investment landscape but the pundits will fight to the death before going down.

2008 Feb 13 09:32 AM

[Arohan:]

Good work. I have been insisting that the recession is here for quite some time now in my blog (www.arohanvalue.com). Needless to say it has generated quite a discussion

www.arohanvalue.com

2008 Feb 13 03:20 PM

[helplessobs...:]

One of the first lessons I learned in investments not to pay much attention to the recommendations of stockbrokers. In our local office if you want to know how Saturday's football games will turn out, ask the brokers. If you want advice on investments get to know the people with grey hair watching the tape.

2008 Feb 13 03:34 PM

[pepe:]

Down market periods such as the one we are in right now are like the Emperor's nakedness; only the honest and nontalking heads will acknowledge the lack of clothing!

What is the FICO score for BAC, BSC, MER, MS, GS, CFC, et al? Are they SUBPRIME BORROWERS now?

2008 Feb 14 09:24 AM

[gordon:]

Of course those are housing related. Energy has done ok if you bought dips. CNBC should be made to disclose how much money each pumper-guest PAYS THEM TO APPEAR.

2008 Feb 14 10:33 AM

[Phil Anthropy:]

It would be helpful to have the pundit tool saved in an Excel format that can be read by Excel 97. The current tool blows up Excel 97, and Microsoft's solution is to upgrade it (I don't think so). Those who are fervent about pointing out losers should be equally willing to post lists of winners, because there are many. Although in a classical economy we would be in a recession, we will not have one. This is because we are no longer operating in the usual model. For instance, our deficit spending should have weakened the dollar and raised interest rates years ago, taking us into a recession, and correcting our excesses. Instead, China, Arabia and possibly the Fed have bought our debt and kept interest rates low. When banks begin to fail, sovereign funds and the Fed step the rescue. We are no longer operating in a free market economy. Instead, we are operating in a financial oligopoly. The way to make money in this market is not to narrowly anticipate macroeconomic conditions, but rather to find bloggers or advisers who seem to be correctly predicting this chaotic market through whatever tea leaves they are reading, and follow their advice, both on the upside and the downside, because other than general sector momentum and market trends, individual stocks are fluctuating wildly in both directions in this circus we call the stock market.

2008 Feb 14 07:15 PM

[Carmen:]

leojbourne:
read your .xls into open office (openoffice.org) and export to whatever you want

On the article:
Two kinds of people care about your money. You and those who'd like to lay their hands on it. You're grossly outnumbered.

From the handbook of Jesse Livermore: "The only thing that is ever correct in the market *is* the market. Everyone else has an agenda".

2008 Feb 15 12:11 AM

[slickvguy:]

Dear mr. internet nostradamus #19384757636,

A recession has a definite meaning - two consecutive quarters of negative growth. It is a FACT that we are NOT currently in a recession.

A bear market is commonly defined as -20%. From peak to current price, the s&P 500 is down about 14.5%. Thus, technically-speaking, we are not in a bear market. Yet.

The current environment is one of a)slow growth, b)housing/credit bubble burst, c)historically high p/e's, d)rising inflation (regardless of what the BLS's massaged numbers indicate), e)flat corporate profits. Clearly this is not a good environment or the stock market as a whole.

Touting your horn about the subprime-related stocks is laughable. You and about 50 million other investors saw the same thing. Big deal.

2008 Feb 17 11:38 AM