Congrats to Doug Short for being cited in today’ Barron’s. Mike Santoli mentions his 4 Bad Bears Market as an contrary indicator of trader sentiment.

He writes:

“Perhaps the time to become seriously concerned won’t arrive until professional traders and snack-table laptop investors quit passing around this latest version of the “Four Bad Bear Markets” chart ( so energetically.

It shows this rally to have about equaled the duration and magnitude of the doomed rebound off the 1929 lows, and to have outpaced the other post-bear recoveries of the past century. It argues, perhaps, for a true retrenchment or stall soon.”

There is a small URL error that needs to be addressed; this mistake suggests the basic premise of Mike’s argument is incorrect.

Unfortunately, the crack tech staff at Barron’s linked not to 4 Bad Bears Market but instead, pointed to the more recent D-Short chart, titled,”The Road to Recovery.” This chart looks not at the possible amount markets can fall, but rather, how much further the rally can run. It compares 3 prior bottoms with the current one. (Charts below)

From a contrary perspective, it argues for the exact opposite conclusion than the Four Bad Bears chart that I suspect Mike was referencing. Freudian slip or simple URL error, it shows the challenge of relying on blog posting for contrary sentiment.  You have to keep up not only with what is posted, but what is au courant at the moment. As we all know, that changes second to second.

I wonder: Does this change Mike’s view of the contrary factors?

UPDATE: August 22, 2009 11:58am

Mike Santoli replies:

I shouldve been clearer in my reference to the Short chart. I did intend to link to the recovery chart, so there isn’t a URL error. And it doesn’t change my thought on this chart’s popularity. Seems to me it’s being sent around mostly by folks who want to show that this rally at this stage is way ahead of all other “real” market recoveries and is most like ’29-30, thus we can’t plausibly expect it to deliver more upside soon and the market probably needs to correct hard.

I don’t view this as any raging contra signal, just another indication that sentiment remains more cautious than one might expect after a 50% ramp.



Is this a contrary indicator?



Or is this newer chart the one that we should be focusing on ?



Gummy Bears
Barron’s AUGUST 24, 2009

Category: Contrary Indicators, Markets, Technical Analysis, Weblogs

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

42 Responses to “Bad Bears or Road to Recovery?”

  1. cvienne says:

    So great…

    With the NEW chart we have what to look forward to?

    In two years (based on the two models), we’ll be FLAT…

    Why risk the downside if the BEAR scenario plays out? Here, at best you’re looking at 2 bones up and 5 bones down (maybe more)…

    The green shoots were the easy fruit that was picked before it was ripe, eaten too fast, and is now providing gas pains in the intestines…

  2. call me ahab says:

    any increase on stock prices at this point is based on fantasy- recover to where? recover to what? where are the jobs? where is the industry?

    that is why i see the current rally nothing more than a big charade- what is the impetus to drive the prices higher except in low volume manipulated trading amongst the market makers-

    answer me this- why should we believe in this rally?

  3. ElvisP says:

    Road to recovery link has a ‘)’ at end. bad link.


    BR: Good lookin out!


  4. Darmah says:

    Hmmm, I’m sitting at my snack table with my laptop — with a cup of coffee, on the deck listening to cicadas.

    Mom always said I was contrary.

  5. Mannwich says:

    Chart, shart. Comparing different time periods with different issues, different worlds, gov’t responses is a bit of a fool’s game. As the inimitable Derrick Coleman once said while with the New Jersey Nets quipped, “the ship be sinking”. Period (or as Shaq spelled it, “Period”, P-e-r-i-d, Period”).

  6. Moss says:

    It all is a lesson in just how potent the incumbent elite hegemony is.
    The power resides in the status quo not in any elected leader.

  7. Onlooker from Troy says:

    I saw this article just this morning and had the same thoughts. The other thing I noted was that this article (the other part) was a lot of rationalization for the rally to these levels and how it’s absurd (my word but basically his message, IMO) to think that we will see a significant decline from these levels since they are the levels we saw 11 or so years ago.

    This just shows once again the faith that those on Wall Street (and elsewhere) put in the “wisdom of the markets” and their infallibility. Also it completely ignores the fact that the heights we scaled in the late ’90s and the late ’00s was base on two enormous bubbles that had easy money policy at their roots and a huge debt pile as their result.

    To believe that those levels were at all justified (which he reflects by stating that we should not drop below these levels) is to go back to the thesis that there’s a new paradigm of valuations and that we won’t revisit the single digit P/E levels again, etc. I really had hoped we had burst that line of thinking, but alas apparently not. So we’ll have to wait a while for that nasty mean reversion to kick in again. It’ll only be worse down the road.

    I find this article itself to be a contrary indicator.

  8. WaveCatcher says:

    Gummy bears, yummy charts!

    The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function.

  9. holulu says:

    The American government — which we once called our government — has been taken over by Wall Street, the mega-corporations and the super-rich. They are the ones who decide our fate. It is this group of powerful elites, the people President Franklin D. Roosevelt called “economic royalists,” who choose our elected officials — indeed, our very form of government. Both Democrats and Republicans dance to the tune of their corporate masters. In America, corporations do not control the government. In America, corporations are the government.

    …we have elected a candidate of change. To which I respond: Do these words of President Obama sound like change?”

    A culture of irresponsibility took root, from Wall Street to Washington to Main Street.”
    There it is. Right there. We are Main Street. We must, according to our president, share the blame. He went on to say: “And a regulatory regime basically crafted in the wake of a 20th-century economic crisis — the Great Depression — was overwhelmed by the speed, scope and sophistication of a 21st-century global economy.”
    This is nonsense.
    The reason Wall Street was able to game the system the way it did — knowing that they would become rich at the expense of the American people (oh, yes, they most certainly knew that) — was because the financial elite had bribed our legislators to roll back the protections enacted after the Stock Market Crash of 1929.
    Congress gutted the Glass-Steagall Act, ……

    Consider what multibillionaire banker David Rockefeller wrote in his 2002 memoirs:
    “Some even believe we are part of a secret cabal working against the best interests of the United States, characterizing my family and me as ‘internationalists’ and of conspiring with others around the world to build a more integrated global political and economic structure — one world, if you will. If that’s the charge, I stand guilty, and I am proud of it.”

    Read Rockefeller’s words again. He actually admits to working against the “best interests of the United States.”

    And more:

  10. Mannwich says:

    But, hey, if Wall Street and the markets are doing just fine, then we know for sure the economy must be doing great as well. We went through this very kind of nonsense with the Bush admin, but at least they could point to unemployment under 5%. Nevermind all the brutal evidence NOW that things are worsening everywhere else in the real world. Who cares about them/us anyway, right? Pump, pump, pump the financial paper and everything will be just fine all across the Main Streets of this great nation of ours.

  11. mcdermott says:

    Perhaps the chart is the correct one and Santoli cited the wrong chart title in quotes. The linked chart agrees more with his description of it and his optimistic outlook. Whichever error it is, your point is taken.

  12. Cohen says:

    Back to the topic: In BR’s tech ticker video he talked about while fund managers are pretty much all-in, alot of individuals, as can be seen by blog comments, are bearish.

    IMO, these people have been bearish for a long time and it tends to be the same group of people making the comments, kind of like here. Two, the average person, from what I believe, has most of their stock exposure through funds, so if fund managers are all-in, I would argue that a lot of individuals are largerly invested as well. Data from Trimtabs would back this up.

  13. beaufou says:

    Beyond the charts, is this a crisis on a scale never seen before making past experiences obsolete.
    It seems to me that the real economy is on the road to collapse while the financial sector supported by an absurd monetary system struggles to make heads.
    The crossroad between fantasy and reality may come when States are in dire straits and countless organizations such as the FDIC need massive bailouts.
    I’m not qualified to judge how long our currency can appear to have any kind of value but it already seems worthless to me.
    In the grand scheme of things, expecting many challenges in the near future such as water and food shortages in many parts of the world, global warning etc., recovering the destructive super power system may be a small step for our finances and a giant leap back for humanity.
    Maybe this should be the time to pause and reflect rather than run and reinflate.
    Recovery of what? to quote ahab, is what we should be discussing.

  14. alfred e says:

    Well if everyone is all in through funds, and they’re not spending sh*t now, how is the “expected” recovery going to happen, and what happens when the market corrects? Consumer spending sinks even lower?

  15. going broke says:

    tsk-tsk-tsk, big boy blogs trying to dis the little boy blogs, and they can’t even get it right! I’m thinking Barron’s, a subsidiary of The Wall Street Journal Digital Network, affiliated with, and sister companys MarketWatch, All Things Digital, SmartMoney, and probably more… are feeling a bit threatened. All those self proclaimed experts are losing daily traffic because these “little guys” are displaying the truth (with charts) mostly without the twist in data and letting the readers make their own decisions.
    09:40 am ET August 22, 2009

    Douglas Short wrote:

    I saw a reference to the “Gummy Bears” article in Barry Ritholtz’s “Big Picture” this morning:

    Thanks to Barry, I’m spared the need to comment on Santoli’s self-consciously witty but misguided perspective.


  16. Andy T says:

    Good Point Barry!

    Santoli missed the subtle change going on with the charts….Dshort is now presenting the chart from the frame of view “road to recovery.”

    FWIW, I never thought of DShort’s charts as an “indicator” of sentiment, because from what I can tell he wasn’t making “assertions” with them. He was simply documenting where we are relative to other really bad markets. Think Santoli is reaching a bit with this one….

  17. Onlooker from Troy says:

    “Think Santoli is reaching a bit with this one….”

    They’re DESPERATE for the market to stay elevated. It’s palpable.

  18. Jurgen tried to post:

    Barry Ritholtz is bearish and bitter – an excellent contrary indicator by itself (works every time). If you want something more scientific, this week’s sentiment survey by the American Association of Individual Investors showed that the percentage of bullish respondents declined from 51.0% down to 34.1% Sorry Barry, but Mike Santoli is correct, the sentiment on the street was excessively bearish this week (and the bears were punished on Friday) — this is a fact.

    Jurgs, commenting here is a privilege — we do not appreicate readers who a) do no research work before posting and b) post factually incorrect statements at the site.

    As to my views, I very publicly flipped Bullish early March while we were in freefall — see this

    And as I noted at Tech Ticker Thursday, I believe this rally, while dangerous, may have further to go

    When you have a greater respect for the truth, and are willing to do a teenie eenie bit of homework, come back and try again. Until then, you simply are not worthy

  19. cvienne says:


    “The Entertainment Economy, it’s the investable theme everyone’s looking for”

    Your rhetoric entertains me everyday, and that’s free…Not much $$ to be made there…

  20. fusionbaby says:

    Let’s face the future, ignoring the white house-congressional-main stream media-wall street spin, by confronting the fundamentals and basic economic indicators of our real economy. Residential and commercial real estate will both drop in valuation significantly from this point forward (another 20-30% for residential and CRE has just begun so will have close to a 50% correction). And then valuations will stay flat for at least a decade. The stock market and bond markets will soon be dead (thanks to a broken economy, high taxes, high interest rates, government intervention, etc.). In 2 or 3 or 5 years inflation will wipe out the remaining “value” of the USD.

    IMHO, a more realistic investment plan would be a free and clear small farm; and free and clear , small single family residence rental properties; and some small businesses that deliver services and products that people will need and want in depressionary or up and down recessionary periods. Or, one could consider going off shore with their money and living in a commodity based country (like Brazil or Australia) and setting up some small businesses and income properties there.

    C’mon. The USA is toast. It’s going to be turned into a third world fiefdom of China (or whatever the global power elite plans are for USA). Are we really going to continue with this status quo mentality and then feign shock and awe that we now living on “desolation row”?

  21. dead hobo says:

    The only consistent conclusion I can come up with is that no wall street professionals expect the stock market or commodity market to reflect the underlying economy. The markets will reflect liquidity and enthusiasm while the economy will function like Japan’s did after it crashed several years ago. Thus, the financial markets are decoupled from the economy, earnings, and realistic forecasts. The financial markets are reflections of the monetary punch bowl.

    A bubble is being used to repair a bubble burst, again. Wall street is just counting on that reality. Bernanke is Greenspan, lite. And the rest of the world is helping out. Asset inflation is the new constant in our lives. As long as leverage is managed to prevent a Minsky moment, this bubble could last a long time.

    The financial markets are more a reflection of the central bank printing press than the underlying economy. Bernanke has no problem with this as it enhances his chances for reappointment. Wall street has no problem as the government printing press is how they make money now. Too bad nothing of substance is on the horizon. However, that appears to be only a minor objective.

    As long as the punch bowl remains full and active, the markets will continue to rise.

  22. DiggidyDan says:

    I think it has a little more to go, see:
    August 12,
    “been a while. . . on vacation in the Black Mountains region of NC for 2 weeks and reformatted, reinstalled my system. Last 4 days i was just trying to play catch up! Now, pulling numbers completely out of my ass. . . market goes down to 979 back up to 1062 for top”

    May go further than that, per Ben22′s ideas.

    Also, Mebane Faber thinks it has a little further to go:

    “Still Waiting”

  23. Steve Barry says:

    Sentiment is tricky to measure…this Investors Intelligence reading is at fresh 5 year highs…higher than anytime during the housing bubble. It seems to do ok at predicting turns. QQQQ Sentiment is just off at least 3 year highs, at a very lofty level.

    I agree a lot with dead hobo above…this time may be different in that the consumer/small investor will not be able to partake in the rally, so it might end quite abrubtly. They are too busy fighting foreclosure or underwater-ness.

  24. Steve Barry says:

    One other thing dead hobo…the small guy who can’t partake in the market anymore is getting smoked as oil has doubled from the bottom, thanks to the same printing press bailing out the fat cats.

  25. DiggidyDan says:

    Stevey B? Good to see ya man! Do you think the printing presses are going to screw up your long term call based upon that debt vs gdp chart?

  26. flipspiceland says:


    How many people live and therefore are covered in Canada? About as many as two of our states, that’s how many.

    Name one nation that has ever attempted the herculean task of covering 500,000,000 people besides China and if you’re willing to accept China’s draconian system?

  27. Mannwich says:

    @Steve Barry: Welcome back. Oil was at $16/barrel in ’01 during/at the end of the last recession. The economy’s in far worse shape now and oil is above $72/barrel, but, nooooo, it’s not due to anything but good clean supply & demand. Yeah, sure it is……

    I know the landscape is different today due to global free trade and the emergence of various emerging markets like China, India and others, but there’s still no fundamental reason for oil to be trading at above maybe $40/barrel, probably even closer to $30/barrel.

  28. Cohen says:


    Also Canadian and it makes me laugh too. Our system is not perfect but everyone has coverage. I saw a segment this past week on Kudlow’s fantasy-land where steve forbes and some other guy were arguing that a public/private system would reduce margins and the income growth of healthcare companies. I was disgusted. This is peoples’ lives we’re talking about. Capitalism is a good economic structure not a social one and maybe healthcare is one of those things that shouldn’t be a growth industry.

  29. Thor says:

    I’m with Manny on this one (and +100 points for using shart in a sentence!). Comparing this stock market to one’s in the past is a fools errand. Lining up this low with that low, lining up the run-ups. They’re all different, they all played out in different ways, and this one will too.

  30. [...] It is worth pondering just how important the political element is. Note the long, sad decline in the 1930’s. The cause was in part political. As we have said many times, the reason that the Recession of 1929 became the Great Depression was because the government took no action to stem the cascade of bank failures in 1930. The US faced a similar situation in late 2008 following the Fed’s and Treasury’s near-catastrophic decision to let Lehman Brothers fail. Though the mess from that has been significantly cleaned up (at great cost), no one knows at this point just what economic mischief the Obama administration is yet capable of making and what the chart above will look like in another two years. (HT: TBP) [...]

  31. swood says:

    Hey Barry. Why do we always have to get your stock market predictions from other websites such as Tech Ticker that’s listed above? Would have never known about your thoughts without being redirected to another site. I’m not talking about your March call. I missed that too because I don’t frequent that site. Would appreciate hearing how you feel at present since this is your blog and I come to your site everyday in the hope of getting a better financial education. A quote that took almost everyone by surprise a few months ago was when you mentioned offhand that you were invested at 70-30 and then a month later at 60-40. Wonder where you are now? The vast majority of your articles are bearish, yet you still are on the bullish side. Don’t get it. Seems like I learn more about your calls whenever you go on Tech Ticker.

  32. Seattle Chill says:

    I don’t understand how one can use blog comments as a contrary indicator. True, commenters have been hugely bearish all the way up this year, but they were also very bearish right before the crash last year.

    Virtually everywhere, I see arrogant gold bugs shouting down anyone who argues with their prediction of a huge stock market crash, followed by hyperinflation. The contrary position would be to go long stocks and short gold. Anyone doing that?

  33. jrm says:

    (My favorite bear remains Bear Grylls.)

    Deciding to sell is harder than deciding to buy.

    I think the rally still has room to go, even for some financials.

    Take Allianz for example. The stock is up 50% for March lows, but its P/E is 5%.

  34. jrm says:

    Sorry I meant its P/E is less than 10 and its dividend yield is 5%.

  35. Steve Barry says:


    It’s not so much the printing presses, but the implied backstop of the government that has eased the panic…not the bad debts mind you…those are still there. But there will be no free lunch. Other things will now break, because you just cannot solve a mountain of debt by propping it up and making more debt. We are on borrowed time. The most amazing thing to me is how the general public and MSM so believe the crisis is fixed. Stocks only rise now if the dollar falls…how’s that gonna work out?

  36. call me ahab says:


    good point

  37. danm says:


    How many people live and therefore are covered in Canada? About as many as two of our states, that’s how many.
    What’s your point? That your country is too populous to nationalize? Baloney.

    Our system works by province anyway. If you went state by state it would be the equivalent.

    If you keep the system as it is, most of your people are going to end up in the public system anyway as the population gets older, drops out of the workforce and as companies cut down on health care benefits to cut costs. So either you become a giant Calcutta or you nationalize.

  38. Mannwich says:

    I know anecdotal evidence is unreliable bit I’m out right now in downtown mpls and have never seen it so dead on a saturday night, even in the frigid winter. Every place is basically dead, even the newer W hotel bar, which is usually wall to wall people. Its literally not even 1/4 full right now. Not kidding. My buddies and I are all shocked by this. Just the facts.

  39. Cohen says:

    @Seattle Chill

    Totally agree and made the same point above. However, some sentiment indicators showed an increase in bearishness last week

    But after this weeks big move, i’d wager there’s a shift back to more bullishness. Either way, i’m not reading too much into the next two weeks and more honest action should be on display post labor day.

  40. [...] Bears – Barron’s…and Ritholtz’s response Bad Bears or Road to Recovery? – Big [...]

  41. [...] Three mega-bear markets compared.  (dshort also Big Picture) [...]

  42. [...] see Barry Ritholtz’s Bad Bears or Road to Recovery? to see a graph comparing the current Splenda market “rally” to previous bear market [...]