4.22.2009

Bear Market All-Stars - Who Will Blink First?

You know their names. Whether you agree or not you stop to listen or read when they make comments. They are omniscient. They broke away from the crowd and made prescient calls at critical times. Several of them were named as contestants in Time Magazine's Most Influential People List for 2009. They are... the all-stars of the bear market, the A list includes:

  • Nouriel Roubini, professor at New York University's Business School
  • Meredith Whitney, former banking analyst at Oppenheimer, recently established Meredith Whitney Advisory Group, LLC
  • Nassim Taleb, author of the Black Swan
  • Peter Schiff, President EuroPacific Capital

You have to wonder if they are dealing with an inherent problem of stardom. They are too damn popular. People hang on their every word. They have all gained prominence by being early to call out the crisis, but the real question is can the stars of the bear market also call the turn? History suggests this could be a difficult task.

Think of the stars of the last great bull market. Henry Blodget, Abby Joseph Cohen, Ralph Acampora, insert name here... Those stars faded, and you have to wonder if the current stars may lose some of their luster when a recovery emerges. The sad truth is you are only as good as your last call on Wall Street, all that matters is what have you done for me lately?

Maggie Mahar, author of Bull!, detailed the struggle internally for Ralph Acampora when he decided to meet his boss and discuss his concerns during the great bull market of 90's:

"Abby is the queen, and I'm the king. The problem is, at some point, one of us is going to blink. You know this market can't last forever. And I'm enough of a competitive son of a ***** that I want to get out before Goldman. But if I turn negative, people will get very upset."

Nouriel Roubini was out today with fresh comments defiantly labeling the current run in stocks a "suckers rally". Roubini's initial work focused on his area of expertise, economics. Being an expert in economics does not necessarily make you a stock market expert. Roubini may run the risk of being right on the economy but by trying to call the market as well he runs the risk of destroying his own credibility. It is possible for the market and the economy to diverge at times and you have to wonder if his fame is encouraging him to reach just a bit.

At some point, he will need to get positive, start to see the light at the end of the tunnel and he will have to say no that is not an oncoming train. That is a glimmer of hope. So the question is, will he do it? Can he even be expected to do it or will he overstay his welcome in the bear cave?

Earlier today Clusterstock joked that some believe Meredith Whitney deciding to go independent and establish her own research firm was some sort of contrary indicator for the financial sector as a whole. Interesting, yet risky, decision on her part, intriguing debate at a minimum. As we have seen over the past month, financials can turn in a hurry! She runs the risk of now not only losing her personal credibility but also that of her new firm with her name on it if she fails to anticipate the turn.

The last critical point to consider for our bear market experts is the calls that made them famous were ahead of the curve and against the crowd. They stood alone in the minority and they were proved right. At this point, they all remain fairly negative but they now belong to the majority. They are a victim of their own fame and risk being caught up in it. Psychologically they are afraid to leave the comfort of their own notoriety at the risk of being wrong and alienating their followers. When they first made their calls, there was no risk. If they were wrong no one would ever care or call them out. They had the freedom to act and think independently. But now, their reputation is on the line and they have to know deep down inside that all they have gained over the past year can be lost over night when the streak of great calls end.

Everything eventually comes to an end, all stars burn out or fade away, economies recover and new bull markets emerge, led by a new core of overnight geniuses. The only question is who are they and when will they shine?

No comments:

Post a Comment