Waiting for the End of the World

We were waiting for the end of the world,
waiting for the end of the world,
waiting for the end of the world.
Dear Lord I sincerely hope you’re coming
’cause you really started something.

-Elvis Costello, Waiting For The End Of The World


In today’s LA Times, Tom Petruno looks at the Zombie Bears: Still betting on economic doomsday — and still waiting. (I have a few choice words in it).

Despite the U.S. economy growing (5 Qs in a row), improving data, and a stock market making two-year highs, to some people, things are still bad and getting worse:

“On the Internet, there is an army of people who will immediately and bitterly dispute anything they read suggesting that 1) the U.S. recovery is real or 2) the global financial system has any hope of avoiding another meltdown.

Barry Ritholtz, head of investment research firm Fusion IQ in New York, calls these folks the “zombie bears.”

“They will not admit the economy is getting better, albeit slowly,” Ritholtz wrote this week on his widely read economics and markets blog, The Big Picture. “They insist the recession was a depression; they insist it never ended. These are the bears who cannot be killed. They will stay bearish, regardless of the data that all but insists otherwise.”

That ought to sting coming from Ritholtz because he was a hero to the bear camp heading into the 2008 financial and economic crash. He had predicted a severe comeuppance after the nation’s long debt binge, and we got it.

But by the time the stock market hit its low point in March 2009, “We already had a massive crisis and collapse, so the worst of what came before was already reflected in equity prices and trader psychology,” Ritholtz said. It was time to reassess.

By refusing to believe that a recovery would follow, the zombie bears have sat out a 70% rebound in the Dow Jones industrial average from its 2009 low — and far bigger gains in many foreign markets.

I spoke with the reporter about the recency effect, about how people’s views are disproportionately shaped not by long term trends, but by what occurred most recently: “It’s human nature to see our present situation, and the future, through the prism of our recent experiences. After living through what was (or is) for many people the worst economic nightmare of their lives, it’s not surprising that we’re now constantly looking over our shoulders, fearful that another crisis is imminent.”

For those of you who like to delve into the psychology of such things, the full column is worth reading . . .


Still betting on economic doomsday — and still waiting
Tom Petruno
LATimes, November 27, 2010


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