RealMoneyMy new column is up at, titled Cult of the Bear, Part I. Its the first of a 2 parter outlining the Bear Case for 2006.

The title jokingly refers to Noah Blackstein’s name calling the last time we were on Kudlow together. Noah runs the Dynamic Fund (stuffed with high beta names like Apple and Google — which is why he outperformed nicely last year).

Before you read the column, allow me to clear a few things up first: I don’t know what’s going to happen next year. Neither do you; nor does anyone else, for that matter. Further, I don’t believe in forecasting – for most investors, it’s a distraction from managing risk and finding opportunities. And, I’ve long ago dismissed the terms Bull or Bear as irrelevant labels.

So if that’s the case, how did I end up as the very lowest market prediction in the 2006 Business Week market forecasts?

Here’s the story:

"As 2006 begins, I’m at the bottom of the barrel, bringing up the rear, and the proverbial low man on the totem pole … and I’m not talking about being in the doghouse with the Mrs. for excessive partying on New Year’s Eve.

Rather, I refer to having the very lowest market prediction — and by more than 2,000 Dow points (!) — in the 2006 Business Week market forecasts.

In this column and one to follow, I’ll describe my top down, macroeconomic process, and how I derived my improbable forecast. I’ll also review some market history and explain how, after all the arguments have been made, these long-term charts reveal the most compelling reason to be cautious on U.S. equities into 2006.

If I were a weatherman, my forecast would be 50% chance of heavy showers — despite the "sunshine" that greeted investors on the first trading day of 2006."

Let’s start the perilous prediction process with the question “How?”


Cult of the Bear, Part I, 1/5/2006 7:18 AM EST

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  1. chuck commented on Jan 5

    It all seems so obvious,so little to make it go,so many pitfalls ahead.
    Why do so few see it? Oh well, maybe it’s just not in their interest.
    p.s. I really dig that airplane thing, excellent!

  2. Emmanuel commented on Jan 5

    Can I be made the high priest of the cult of the bear? Although no one is as bleak as BR in forecasting DJIA 6800, I perhaps outdo him in seeing everything in a negative light:

    My economic soul is a black hole
    No light escapes, quite frankly
    All business is trouble and woe
    Call me the anti-Bernanke

  3. royce commented on Jan 5


    Reading the piece on you in businessweek, I saw that you had good things to say about foreign equities in 2006 even as you expect the U.S. averages suffer a huge drop.

    Granted, the foreign indexes trailed their U.S. counterparts for a long time, but it seems like they’ve caught up by now. And in a globalized economy where the U.S. counts for so many export dollars and percent of world trade, how to they continue to make lots of money during a major U.S. tanking/recession?

    Not trying to argue the point here; just curious about your reasoning.

  4. B commented on Jan 5

    Any investment officer or prudent speculator will say firstly that Barry’s comment about forecasting is accurate. Do you listen to Grantham, Graham and Livermore who say forecasting is folly or Bartiromo, Kudlow or Cramer? Not that I don’t like them as TV personalities but they aren’t going to manage my money.

    How else to you fill 24 hours of droning TV news if you don’t have self pronounced experts filling the airwaves with totally worthless pablum or throwing chairs against the wall? There are ponies in that mess, so CNBC is still of some value…….I guess.

    That said, sentiment drives markets off intermediate bottoms and tops. We are setting up for a nice week and sentiment is going right back where it was in early December. The herd has already forgotten the selling in December or believed the force fed garbage that the market was selling off in December because traders were on vacation, volume was light or whatever the silliness amounted to. More filling the airwaves with useless nonsense.

    Cycles do matter. They simply provide probability analysis of repeatable trends. (All ecomonic forecasting amounts to given its complexity and constantly changing variables.) Those trends are based on a natural rhythm of supply & demand, money policy, sentiment, economic policy and greed & fear.

    2006 should be quite an interesting treat for everyone to snack on. This trading range is too tight to go on forever. History begs a breakout. It will, without a doubt be 2006. or set precedence as the longest, tightest band in the 20th century equity markets. Breakout doesn’t necessarily mean up either. Monthly volatility is near an all time low. That means the spring has a big ole booty sitting on it. Going up 5 more points than a year ago on the S&P is not a breakout. Ladys and Gents, start your engines. The race is set to begin.

    Btw, I noticed Bartiromo’s ring finger is looking mighty bare lately. Barry, I’m young, funny, romantic, smart and pretty easy on the eyes, can you get me a blind date? :) Come on!

  5. nick commented on Jan 5


    I wonder how much of the stock market’s recent gains can be attributed to the public’s shifting sentiments towards the real estate market. Unless some other investment vehicle catches on I suspect that a lot of the money that would have been going into real estate ventures will now go back to the stock market and keep it up for a while, or at least until the boomers start cashing out for retirement.

    The last decade has taught the amatuer investor that there will always be a magic bullet, whether its an internet stock or condos. Or could commodities be the next big thing?

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