Are Bears really more rigorous than Bulls? I don’t know the
basis of that statement, but I hear it alot, most recently from Jim Cramer. Aside from a few obviously conflicted late 1990′s
analysts, I find it hard to say that the typically Bullish, sell side research
analyst is not rigorous in their thought process, modeling, channel checks, and
My own bullish calls — and there have been many of them –
are just as rigorously derived as the bearish calls. Indeed, there are plenty
of meticulous quants, technicians and others who switch Bullish and Bearish
when conditions dictate. They would be insulted at the idea their Bullish calls
they are less rigorous than their Bearish calls.
Of course, the perma-Bulls – the broken clocks, the guys who
lost people trillions in 2000 and beyond, those clowns were never rigorous. But
then again, most of them were merely slick salesman – not analysts, strategists,
fund managers or economists – but touts and salesmen. Bennett Goodspeed (The Tao Jones Averages) had a
specific phrase for these weasels: "The Articulate
I think the reason for this misunderstanding of the rigor
required is simple: the markets and the economy are not stocks – the economy
doesn’t miss an earnings report by a penny, and see the market cut in half the
next day. Sure, an individual stock can do that – but they obviously have a
very different life cycle. The bigger, macro systems — Business cycles, Market
Cycles, Economic cycles — all play out over much longer time periods. And that
requires some patience to take advantage of.
Indeed, that patience is the reason I have been constructive
since last July (with a short negative move post-Katrina), positive for the front
quarter, but increasingly bearish as the year progresses. As long as the short-term technicals are okay, there is no reason to position short — not until
the internals begin to decay significantly.
I am willing to be patient, as any good investor should. If
the denouement hasn’t come fast enough for some people, well, sorry, that’s how
cookie economy crumbles.
Further, some people see a day like today — Nasdaq slapped down a percent — and claim its easy
to "scare people out of the market." That’s nonsense. You can just as easily
scare people back into the market. Its what happens in any strong rally, where people get panicked in. Or how about a good old fashion short
squeeze? (or both). Calling in borrowed
stocks? Goosing index futures?
Scaring the Bears is just as easy, if not more
so, given the theoretical infinite losses on the short side.
This is especially so when you consider all of the forces
that line up on the Bullish side: Mankind’s natural progress, population growth, and technological
development is the backdrop that has very strong Bullish tendencies. That’s not including the Wall Street machinery, the mutual fund industry, ansd whatever administration happens to be sitting in the White House.
bearish when a cycle calls for it means you are willing to buck the natural longer term tide to take advantage of (relatively) shorter term movements. Its not easy, because after all, in
the long run, the markets go higher.
Of course, as the man said, the Long run is a misleading guide to current affairs. In the long run we are all
dead. . .
Small World: On Saturday, I mentioned problems with Citibank’s Panic/Euphoria sentiment measure. Then, I discussed the work of James Montier of Dresdner Kleinwort Wasserstein (DrKW) yesterday, (Seven Sins of Fund Management). This was the first time I ever mentioned him. By coincidence, I read about a Fear/Greed indicator last night from the very same James…Read More