Reviewing — and Roasting — the Perma-Bears
There is a terrific cover story on the PermaBears in the upcoming BusinessWeek.
I spoke with the reporter about some of the bears discussed in the article on background. The March 2009 bullish call managed to keep me off the Perma-bear list, and for that, I am grateful.
The article looks at the “bearish forecasters who rose to fame in the market crash of 2008″ and who have, for the most part, “not surrendered their pessimism.” BW divides the dismal forecasters into three groups: The Grizzlies, the Bears with Less Bite, and the Domesticated.
The Grizzlies:
Nouriel Roubini
Robert Prechter
Peter Schiff
Michael Panzner
Nassim Nicholas Taleb
Marc Faber
BW looks at the track record and history of each of the Grizzlies. They really roast Roubini, Prechter and Schiff for being early (Roubini) for missing bull markets (Prechter) or making money losing bets (Schiff); They seem to have better things to say about the track records of Panzner, Taleb and Faber.
Bears with Less Bite
Gary Shilling
Stephen Roach
Meredith Whitney
David Rosenberg
Less criticism — including a nice write up of my catamaran and diving buddy Gary Shilling (whose wife is lovely) and of the cool calm approach of Think Tank contributor David Rosenberg.
Domesticated
Jeremy Grantham
James Grant
What can you say about the above to that is anything less than laudatory? “Even the most sophisticated people have difficulty switching world views, especially after their views have been affirmed.” BW praises these two for recognizing that, and “trying hard to change.”
One small caveat: I know most of the people on the list personally — I have broken bread with Roubini, Panzner, Taleb, Shilling and Rosenberg; I also greatly admire Faber, Grant and especially Grantham. So I have absolutely zero objectivity when it comes to evaluating these people.
Regardless, the entire article is well worth your time . . .
>
Source:
Time to Slip into Something Less Comfortable?
Jessica Silver-Greenberg
BusinessWeek, June 10, 2010
http://www.businessweek.com/magazine/content/10_25/b4183048417437.htm
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June 11th, 2010 at 8:14 am
Bullishness and bearishness are states of mind more attributable to personal bias than to simple rationality. From a rational standpoint (and that doesn’t count for much in a world driven by emo-driven bias), there is no valid reason to be bullish, or even mildly optimistic, when surveying The Big Picture. There’s simply too much debt washed up in the marshes of the economy for anything to return to a reasonable semblance of normalcy. The poison is everywhere. Will there be great leaps upward? Yes. Will we find a stable foothold at a new high? Not for long.
June 11th, 2010 at 8:16 am
Grant has made me a fortune over the years – a lot more on the long side then the short side. He definitely sat out the internet bubble (except for picking CMGI before it went up about 200 times!). Grantham, Whitney, and Rosenberg are also usually worth listening to. As to first half dozen guys on that list, they make for fun reading, but I don’t know anybody who pays them serious attention when investing money (except maybe Faber who actually often has some outstanding long ideas when I read him in Barrons).
How about a BW article on the perma-bulls (James Paulson, Bob Dahl, Ned Reilly, Bill Miller, Larry Kudlow to name just a few), who had anyone listeing to them buying in March 2000 and buying every single dip from 2007-2009. I’ll say one thing for the perma-bears – you might miss a good chunk of bull moves, but at least you preserve capital for good buying opportunities. Do the folks who listen to the perma-bulls have any capital left?
June 11th, 2010 at 8:31 am
Roubini deserves credit for seeing it coming AT ALL. Contrast that to those that had infinitely more influence over the health of the nation and saw nothing, or willfully chose to see nothing.
Timing can be fickle, and needs to be managed. I would not disparage those who saw the hurricane coming unless they had an bad explanation for it at the time of their call (or actually had a hand in causing it), which would make it more luck than ability.
June 11th, 2010 at 8:43 am
Most – MOST- economic forecasters are one-trick ponies. The predict a thing until it finally happens, then say they saw it coming, then predict it over and over again.
Obviously, that is not insight. There will always be somebody, somewhere, who happened to be correct – like Roubini was – just as there will always be a Warren Buffett. But to be correct both up and down is very, very rare indeed.
June 11th, 2010 at 8:45 am
Interesting that a basic fact is not mentioned – long term permabears have been correct. You could have missed the last ten years of the stock market and be way ahead without taking any of the risk. And for the duration of this secular bear market – probably at least another 5 to 8 years – the same will hold true. Of course, there are periods where risk taking can be profitable in a long secular bear market. But compared to being a permabull, the smart thing to be is a permabear. Does anyone really think a Shiller/Graham p/e above 20 is going to last in this environment when history shows that it always declines below 10 at some point?
June 11th, 2010 at 8:48 am
The bias in media and in media analysis is to promote optimism and optimistic people.
Optimism sells and business needs optimism to make money. People without optimism for any reason (realism based or not) are shunned by those who want to make money because people will buy from optimists. It is consistent to ridicule or expose those who are not optimistic because they would be bad for business for those who require optimism to succeed.
Disaster is good for business if it currently exists because crisis is good for profits. Possible or potential disaster is bad for business because it keeps the looky-loos home. Disasters are best ignored until they can’t be ignored any longer. Then they become annuities.
Nobody in media ridicules the perma-bulls who are right until they’re not.
Bloomberg supports the bulls and castigates he bears because it is good business to do it. Without hopium, there is no reason to read Bloomberg.
Optimism is good for business. Especially if it is promoted by ‘recognized experts’ who can bring in the customers.
June 11th, 2010 at 8:49 am
I wonder who would be on the PermaBull list? Hmmm…..
June 11th, 2010 at 8:53 am
I was 100% long stocks from July 1984 until I went 100% cash in July of 2007. Of course, I have missed the big rally of 2009, but even my meager interest returns since then are on top of a position that left the market at 14,000. How many people got out, then back in? For INVESTORS, not traders, the current sitiation looks nothing but bearish—and will so for quite some time.
June 11th, 2010 at 8:57 am
Until this cycle is fully played out, we won’t know if Roubini’s (who doesn’t pick stocks or makes market calls in general) and the others’ forecasts are correct. Let’s not forget that this “recovery” is probably 100% due to unprecedented intervention by governments and central banks, and no one could have predicted the size of the (still ongoing) interventions.
Again, i suggest not counting the chickens until the market interventions cease and the current economic cycle is complete.
BTW, every single one on this list deserves more credit than Hank Paulson, Bernanke, Greenspan, the entire Fed Board and a much larger army of perma-bulls who either didn’t see the crisis coming, or lied about it publicly.
June 11th, 2010 at 8:59 am
Besides, if both optimism and realism were promoted equally, the end result might be an educated consumer of investment services. An educated consumer would be able to see through the bullshit much easier than the current and historical consumer. Such an event would be terrible for many on Wall Street.
Better to keep the rubes optimistic and trusting than teach them anything of value that might be used against Wall Street.
June 11th, 2010 at 9:02 am
Besides, most business reporters really suck. CNN makes me want to wretch with regularity. God those people are dumb.
June 11th, 2010 at 9:03 am
Bear hunting is just the latest fad of the perma-bulls trying to silence their critics. You can’t rouse the ire of this bear. I’m hibernating. Sell in May and stay away–till August, that is. ZZZzzzzzz…
June 11th, 2010 at 9:14 am
I first started reading Roubini on a regular basis in the summer of 2006, and I’ m glad I did. Sure, he was what, a year early? And BW is giving him grief because he didn’t top tick the market? But look at the larger picture. T-Bills have done better than the S&P over the past 13 years. Perhaps they should do a story on how the permabulls have wrecked many a trading account…and yet they’re still on CNBC as if they have any credibility.
June 11th, 2010 at 9:16 am
Of course, the fatal flaw in these kinds of articles is placing your chips wholly onto a pundit’s say-so without doing some critical thinking. I don not watch CNBC (despite my knock on Kudlow) because I would have to add 5 more voices to the 45 that are already talking to me in my head. Oh yeah? Well why don’t YOU STFU?! Who do you think you’re talking to you moron?!! I’m gonna kick your ass after I exit this short!
June 11th, 2010 at 9:33 am
Hope the writer is prepared for an attack by the Schifties. Schiff’s cult does not take criticism well.
June 11th, 2010 at 9:34 am
I’m still holding out the belief that we may have another significant correction in the fall. Biggest reason is that we will starting getting numbers and comps that are supposedly dating back to a period when a recovery was underway. We will get the real tale of the tape then. Until then, we still have weak comps to work with, and still hangover effects from all the government gimme’s.
June 11th, 2010 at 10:08 am
BR – Inquiring minds want to know:
Is this mag cover a contrarian indicator???
June 11th, 2010 at 10:10 am
the mag cover indicator is m0re about general interest magazines, and not the Business Press
But you might note that I included the category “Contrary Indiators” — just in case!
June 11th, 2010 at 10:13 am
Tenaciousd:
“Bear hunting is just the latest fad of the perma-bulls trying to silence their critics. You can’t rouse the ire of this bear. I’m hibernating. Sell in May and stay away–till August, that is. ZZZzzzzzz…”
——
Beware September.
You read it here first.
June 11th, 2010 at 10:14 am
Who would go on the perma bull list? Greenspan,BB and every talking head on CNBC for starters?
Where are we now compared to 2 years? Employment, housing,consumer spending, financial reform? F,F,D and F?
June 11th, 2010 at 10:32 am
I want to reduce my consumer spending grade from D to F
June 11 (Bloomberg) — Sales at U.S. retailers unexpectedly dropped in May, signaling consumers boosted savings as employment slowed and stocks fell.
Purchases decreased 1.2 percent, the biggest drop since September 2009, following a 0.6 percent April gain that was larger than previously estimated, Commerce Department figures showed today in Washington. Demand plunged at building-material stores, reflecting the end of a government appliance rebate, and sales fell at auto dealers, in contrast to industry figures which showed a gain.
Companies reined in hiring last month, making it likely households will keep a lid on spending, which accounts for about 70 percent of the economy. Discounters Target Corp. and TJX Cos. were among merchants reporting gains in May sales, indicating households are looking for bargains to stretch out their paychecks.
June 11th, 2010 at 10:54 am
The idea of “degree of trend” should not be so hard to translate into something resembling a sound bite. The label “time horizon” comes deceptively close.
Richard Russel deserves to be on that list. I’m sure he’s not complaining and that’s everybody else’s loss.
June 11th, 2010 at 11:04 am
An interesting list…but perhaps the more interesting story would have been concerning “Perma-Bulls.”
Of course, “proving” who has been right and wrong depends upon measures used and timeframes.
For instance, it might be tempting to say the bulls have been right since the March 2009 stock market lows (as well as the rebound in GDP); however, what if measures such as those shown in the following charts are used?
http://www.economicgreenfield.com/2010/06/08/disturbing-charts-update-1-part-i/
June 11th, 2010 at 11:06 am
Dead hobo nails it, IMO.
June 11th, 2010 at 11:13 am
Read the article on Bloomberg. Actually, Farber called for a bump up in the markets last year based solely on the huge amount of money the Fed had printed. They didn’t mention that.
By the time you get to the end of the article, it’s attitude seems to be that all these people just need to take a nap; the pods have already been prepared. They can then think like all the others.
June 11th, 2010 at 11:15 am
To my eye this is like a logic problem “Which person does not belong on this list?”, and the answer is Nassim Nicholas Taleb.
The reason is simple – unlike all the other people on that list, with their highly mixed records of prediction, NNT does not make predictions at all and in fact argues against the urge to make predictions.
(NB – I base this on his books only, I’m not sure if he has lapsed from his own thinking in his public appearances.)
June 11th, 2010 at 11:20 am
Off topic, but fairly funny:
BP Spills coffee
http://www.youtube.com/watch?v=2AAa0gd7ClM&sns=em
June 11th, 2010 at 11:28 am
I’m surprised Hugh Hendry isn’t on that list. The key to making money the last 10 years has been flexibility. Being just a bull or bear has been co$tly. I think the Internet has made this game way more volatile and frequent boom and bust cycles are going to be the norm. I’m sure most of these cats took their stubborn position and stuck to it just to bring them more attention and therefore greater riches (by selling newsletters, etc..) People have to be good enough to trust themselves to navigate the stock market in this day and age or don’t bother. Sit it out.
June 11th, 2010 at 11:42 am
I just wonder if Kudlow were actually managing money for clients (I assume he does not) if he would be so bullish.
On a side note, saw this interesting piece by Comstock posted at Pragmatic Capitalism today on housing:
http://pragcap.com/the-dire-outlook-for-housing
June 11th, 2010 at 11:48 am
Permabulls are just as bad as Permabears. For the bulls “today” is always the right time to buy the market. Isn’t that what the RE people always said?
June 11th, 2010 at 12:34 pm
I would like to see an analysis of Abby Joseph Cohen’s calls over the past decade.
June 11th, 2010 at 1:20 pm
[...] the perma-bears. (BusinessWeek via Big Picture, Crossing Wall [...]
June 11th, 2010 at 1:46 pm
The article’s premise that we’re out of the economic woods and the bears are wrong is based on skewed comps and a bogus BLS number with no detailed analysis.
This crap passes for journalism in a national bussiness publication?
June 11th, 2010 at 1:54 pm
LarryB:
how else do you think we got into this mess?
June 11th, 2010 at 2:10 pm
I am not going to say that this article is garbage because i haven’t read it…
WHAT FOLLOWS ARE FACTS AVAILABLE TO ANYONE WHO FOLLOWS MARKETS OR KNOWS HOW TO USE GOOGLE….
On Feb 24 2009 – Prechter Says Close Shorts – Market Ready For a Scary Rebound
http://www.bloomberg.com/apps/news?pid=20601110&sid=aPCwImB7U3Kg
Faber was also bullish equities in March 2009… In fact on March 10, 2009 I emailed BR the following video from Bloomberg “Faber Says Gov. Actions to Boost Stocks”
http://www.bloomberg.com/avp/avp.htm?N=av&T=Marc%20Faber%20Says%20Government%20Actions%20to%20Boost%20U.S.%20Stocks&clipSRC=mms://media2.bloomberg.com/cache/v62ffCpz4aPo.asf
So Basically two of the Grizzlies that are being made fun of as perma bears — were dead on calling the bottom in equities ob the bull side…
THE MEDIA IS BULLSHIT….
June 11th, 2010 at 2:14 pm
2 Facts – Prechter and Faber called the exact bottom on the bullish side…
Faber
http://www.bloomberg.com/avp/avp.htm?N=av&T=Marc%20Faber%20Says%20Government%20Actions%20to%20Boost%20U.S.%20Stocks&clipSRC=mms://media2.bloomberg.com/cache/v62ffCpz4aPo.asf
Prechter
http://www.bloomberg.com/apps/news?pid=20601110&sid=aPCwImB7U3Kg
DID THIS AUTHOR EVEN MENTION THESE THINGS IN THE ARTICLE?????
June 11th, 2010 at 2:17 pm
@LCN, yes I agree about Black Swan guy (NNT better than BS guy????). I have read him for many years now and I agree he rarely makes predictions. In fact he is so adamantly against it he got me to rethink my prediction engine – my mouth. In stead of me saying here is my prediction of the future I think of the possible outcomes – like up sideways down and catastrophe. Then I try to assign values. It actually is a paradigm shift in logic. Nobody likes it when I do that, everybody wants simple sound bite answers so i feel most of society has a logic flaw. Of course that does not extend to the real world well – Fire – what r the pro and cons of putting it out! But “predicting” the future is very difficult.
What I find is that the worlds default is optimism. CNBC, the news, your friends, coworkers – they mostly share the view that things will grow and be ok. So as a reality check I like to listen to some bears cos then maybe you get to the middle.
NNT has really influenced me alot over 5 years now. I like listening to Faber also, but he is entertaining. Doug Kass has been pretty opportunistically bearish.
I cannot predict we are in for bearish times, but I do think it is good to be agile and relatively liquid. That is what I learned from NNT.
My only regret is that I did not short BP when I blogged how bad it was. No problem, there will be another black swan once in a million years event again in next couple years!
June 11th, 2010 at 2:50 pm
After all we’ve been thru the last 10 years, it seems the mainstream financial media still doesn’t know the difference between a bubble and a bull market.
Did Buffett famously miss the tech bull market in the 90’s, or did he sit-out a bubble? We’re the Bears early on the housing bubble, or were the bull just dumb & dumber this time, not seeing the biggest bubble of all time?
Stocks are currently trading where they were in the 1998, in dollar that are worth 35-40% less. Precther sure “missed” one heck of a bull market (cash is up 35-40% over this period by the way). While Precther missed the 2003-2007 bull/bubble, he made up for it on the short side, something the bear bashers never mention. Precther’s January 14th 2010 (S&P 1148) call to go short with maximum leverage is also “in the money” now.
Here is Mark Hulbert on Prechter last year “… considerably more than half the 180+-plus letters followed by the HFD lost money over the last 10 years. That’s what happens when you have a crash. And EWFF (Elliott Wave Financial Forecast) achieved this return with notably low risk. Indeed, on a risk adjusted basis, it has beaten the market over the nearly 30 years that the HFD has been following it — a remarkable achievement given its radical stands – both ways.” BEATEN THE MARKET OVER 30 YEARS. Wow, it really doesn’t pay to be a Bear.
Barry, a few months ago you said “The easy thing to do now would be to go to cash,” he says, a reference to Robert Precther’s recommendation here. I rarely find that the easy trade is the one that makes you money.” Then on May 5th you note that you’re 100% cash, and had been increasing you cash position during early 2010. What was so “easy” about being in cash when bullish optimism was at all time highs?
One final note for the equity bulls. Rob Arnott recently did a study that shows if you had bought a
20 year treasury bond in 1966 and rolled it over every year you would have done better than
buying and holding the S&P 500 through December of 2008.
42 years of equity underperformance! 12 years of cash outperforming! Go bulls, your day is sure to come – check back in 2016.
June 11th, 2010 at 5:18 pm
“So Basically two of the Grizzlies that are being made fun of as perma bears — were dead on calling the bottom in equities on the bull side…
THE MEDIA IS BULLSHIT….” -SINGER, above
~~
nice summation !~
~~
“This crap passes for journalism in a national bussiness publication?”-LarryB, above
Larry,
Good Q: !~
~~
for further http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Bernays+Lippman+Propaganda+and+PR
June 11th, 2010 at 5:25 pm
http://www.edge.org/3rd_culture/taleb08/taleb08_index.html
http://www.longnow.org/seminars/02008/feb/04/the-future-has-always-been-crazier-than-we-thought/
http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Nassim+Nicholas+Taleb
at the min., a good dose of NNT would have saved BP, among, too many, others, tremendously..
June 11th, 2010 at 8:31 pm
Isn’t this the perfect Magazine Cover contrarian indicator?
Watch out below!
June 11th, 2010 at 9:58 pm
“terrific cover story” is exactly correct, BR.
I read that story today and it struck that while I had read most of the info in it before, I’ve never seen the post-crash bears surveyed comprehensively like that.
The lady who wrote it did a masterful job and I suggest all you blog readers get over to BW and check it out.
June 12th, 2010 at 2:32 am
As a contrarian indicator the story is actually a better bearish signal than bullish one. The entire tone of the article is that it is fundamentally “wrong” to be a bear, that the economic recovery underway is durable and proves they were wrong all along, and that the “domesticated” bears are clearly wiser, more reasonable people for flipping over to the bullish side.
It’s nice that BR got credit for the bullish call in spring last year, but why didn’t Bob Prechter’s bullish call in February 2009 keep him off the perma bears list? Talk about your double standards. He started looking for the end of the rally in August last year, and we’re about 10% higher than we were then. An expensive call if you played it too aggressively with options or leverage, perhaps, but that’s why Prechter says everyone except good traders should be in cash anyway.
The alternative was to remain long equities in an environment which, as we have seen, has a lot of phantom liquidity with the power to produce harrowing 10% declines in ONE DAY! What’s the risk-adjusted return on all those paper gains from staying in the market over that period? How many actually sold the top? And was remaining bullish really the onlyright call the indexes are now underwater from where they were for most of the November-May period?!
August 10th, 2010 at 6:53 am
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