I went to CNBC an hour early yesterday, to have lunch with Herb Greenberg. For those of you who don’t know Herb, he is one of the great investigative business reporters, a professional skeptic who cut his teeth as a Journalist at the San Francisco Chronicle for 10 years. (Herb actually has his own "Tab" at Marketwatch — mouse over News & Commentary).
We discussed alot of different things — his newfound enjoyment of blogging, who was the Worst CEO of 2006 is (Ilia Lekach of Parlux, with Overstock’s Patrick Byrne as runner up), the run up in The Street.com stock.
One of the things Herb brought up was my Bullish call on SemiConductors in the Summer of 2004. At the time, Semis were widely despised, AMD was not being taken seriously (it was ~$11), and the Semi Holders were under $30.
Indeed, at the time, it was such an unpopular position that the WSJ ran a discussion of it in their Quite Contrary column: "Placing a Wager On the Chip Sector: Maxim Strategist Ritholtz Sees Tax-Incentives Sunset Picking Up Semiconductors: " (if no WSJ, then you can see the an excerpt of the article here).
What I particularly like about that piece was the fact it was Bullish when most people were negative on the sector. Our discussion is quite bullish on not only Asia, but on Japan — long before it became "trendy." In fact, when I got Bullish in the fall of 2002, and made many more Buy’em calls then I did Sell’ems, I got much of the same grief I am enjoying now — the same Perma-Bull criticisms of those who disagreed with me that I now hear from those who accuse me of being a Perma-Bear. Apparently, these are a different set of people who disagree with me.
Regardless, the common thread is that whenever I stake out an unpopular position, one of the ways it gets dismissed is by calling the author a Perma-XXXX.
Have I been very Bearish this fall, even as the market ran ever higher? Absolutely, no doubt about it.
However, I simply cannot ignore the lessons of the past, and the obvious present indicators which suggest we are heading into a very significant slowdown, with all the repurcussions that will have for the consumer spending, corporate revenue and earnings, and of course, the markets.
But Perma anything? hardly . . .
• Hickey points out another fallacy with the 1995 market meltup and 2006-07. Eleven years ago, the Republican Revolution ushered in lower tax rates on income, capital gains, dividends and estate taxes. By contrast, the Democratic tsunami in the YouTube Election of 2006 should be worrisome to corporate executives, bankers, consumers and investors. Instead, they are partying like it was 1995 and oblivious to what is happening on Main Street and, importantly, in Washington.
• The collapse in housing is spilling over and has begun to impact the general economy. Hickey highlights many of our concerns — the durable goods drop, rising subprime mortgage delinquencies and property foreclosures, a steep contraction in truck tonnage, a surprising decline in the Institute for Supply Management’s manufacturing index and reports (Lazard Capital Markets) that 60% of retailers missed their November same-store estimates.
• As the limited quantities of special deals were gone, retail spending came to a halt after consumers were baited with "doorbuster" deals on Black Friday. At every store he visited after Thanksgiving weekend, Hickey found empty stores and excess inventory. Circuit City (CC) was swimming in iPod inventory ("the new toasters") and at mobile phone stores (Hickey smells an emerging glut) it was the same story with Cingular awash in the new Blackjacks from Samsung, Verizon (VZ) with a plethora of "Qs" from Motorola (MOT) and T-Mobile with xcess Blackberry Pearls.