Moving into 2006 the BAM stock model correctly forecast the collapse in the homebuilding stocks and as that decline continued to play out into 2007 we then told subscribers that we expected to see a “domino effect” (weekly report “The Dominos Keep Falling” dated May 7, 2007) whereby bankers, mortgage brokers and broker/dealers would all begin to cascade lower as well. 

After that forecast proved correct (stocks in those groups tumbled sharply, some as much as 60-80%) we highlighted the next group of victims (according to our model, not our opinion) and suggested selling short REITS as well as retailers such as Sears Holding (because the model was bearish and common sense dictated that SHLD would be hit with a double whammy as sales slowed and valuations assigned to their massive real estate portfolio were marked down) and that also proved to be a correct call.  

If It Ain’t Broke… 

This year, we’re expecting the domino’s to continue tumbling with commercial real estate stocks joining the ranks of 40-80% decliners and we’ve also reco’d aggressive sales/shorts of the technology high-fliers like AAPL, RIMM, and FSLR, because we expect those groups to tumble 40-70% as well.  

Reiterate Ultra-Bearish Forecast  

6000 during 2008 is possible but expected no later than 2009 with an important low due no later than the first quarter of 2010.

Full report coming soon