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
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.
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
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.
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".
A Bear Explains Himself: NEWS ANALYSIS
BusinessWeek, JANUARY 5, 2006
Category: Financial Press
Back on December 1, I mentioned that "Holiday sales increases can be in the 3 to 4% range." This modestly Bullish call was at the very low end of Wall Street projections.
The prime motivation for that range was the decreasing gasoline prices post Katrina, and the love affair with Plasma Screen TVs (that was the good news). Keeping the Bullishness modest was the negative real income for the middle class; on the other end, the increasing take home pay for the ultra wealthy supported the relative strength of the luxury retailer.
The WSJ reports that "overall, Retail Sales rose 3.2%." And, the big winners were the luxury stores. Its a pleasant surprise anytime projections like this end up that accurate.
I also wish to remind you (again) how the silly NRF projection of 22% was; Their absurdity was a statistical abomination (and they were chastised in this space for it)
Here’s the Journal’s summary:
Holiday shoppers spent big on a few products last month, but held out for last-minute deals, resulting in mixed performances from U.S. retailers. Cash registers rang at luxury retailers and teen specialty shops, but sales at Wal-Mart Stores Inc. disappointed.
Overall, sales at stores open at least a year, a measure known as same-store sales, rose 3.2% in December from a year earlier, according to an index of 66 chains compiled by the International Council of Shopping Centers. The trade group, based in New York, had expected same-stores sales growth between 3% and 3.5%. According to the tally, same-store sales at luxury stores grew 6.4%, while discounters ticked up just 2.6%.
"All combined it was good, not great," said Jeff Klinefelter, senior research analyst at Piper Jaffray. "When we finally got the last-minute rush, it was the higher-end consumer that followed through with spending."
Luxury Stores Were Holidays’ Stars
Overall Retail Sales Rose 3.2%, Slowed by Discounters; Holdout Shoppers Also Hurt
THE WALL STREET JOURNAL,January 6, 2006; Page A2
Mixed Stockings for Retailers
See the WSJ’s retailer chart here: