Are Bears really more rigorous than Bulls?

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
theoretical processes.

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
the 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
(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.

To be
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. . .

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  1. anon commented on Feb 13

    by the way, i too rented the aristocrats. i lasted about 30 minutes. it was awful. the profanity did not bother me. it was just boring. a good idea that did not work here. give me vic mackie anytime to spend some time wasting in front of the tv. what did you think?

  2. Ted commented on Feb 13

    I had for gotten The Tao Jones Averages. Wonderful book. I would like to have you do a riff on left brain/right brain traders some time. You have a great blog, I visit every day.

    Ted McDonald

  3. Barry Ritholtz commented on Feb 13

    I keep falling asleep on the movie — and its like Ground hog Day, trying to find where I drifted off!!

    The same joke over and over again — and I havent even seen Sarah Silverman yet!!

  4. scorpio commented on Feb 13

    might want to rethink that part about “mankind’s natural progress” (and i’m not even referring to the aristocrats!). though it has been a lovely couple thousand years…

  5. B commented on Feb 13

    I always wondered where the phrase articulate incompetent came from. I wonder if this guy trademarked it.

    I’ve heard it or something similar to it used to describe the babbling bulls on CNBC.

    On a totally unrelated note….except it shows the stupidity of the perma bulls…and Cramer has been pre-empted in a city of 2 million for Olympic Curling on CNBC. Howsa bout Gurgle? I wanted to hear his recommendation now that it is down 38 percent in a few weeks. Doin a monback? I had a buddy who owned it and I told him to sell at $455 after the options activity led me to believe it was vulnerable to being another INTC mess but no……had to say in….after buying at $445. Says he’s a long term investor. Well, I guess he is now. That’s why I never mess in anyone’s business.

    I’m quite confident it will be guided to fill that gap around $300-320 eventually but my question is if it will fill that gap down around $200. Wouldn’t likely do so for many quarters but the bears are roaring all over the f’idiot’s (that’s an Italian word in commemoration of the Olympics) heads for now.

  6. Barry Ritholtz commented on Feb 13

    FYI: Not that I watch, but Cramers on at 9 and 12 tonite . . .

  7. Joe commented on Feb 13

    I don’t know much about this topic, but I do know that the Aristosocats was about the best movie ever.

    Everybody, everybody, everybody wants to be a cat!

    Oh, wait. Aristocrats? never saw it. sorry.

  8. E commented on Feb 13

    keep up the good work barry. cody’s going to get one heck of a lesson one day on how quick the rug can be pulled out. hopefully, he’s not a jumper.

    in any case, this pretty much sums up the overall irrational posture of the us economy.

    “Striking a more optimistic tone than many economists, the Economic Report of the President said the decline in the personal-saving rate last year to post-Depression lows “may not be cause for alarm.” It blamed much of the trade deficit on other countries that save too much, rather than the U.S. saving too little. ”

    you can’t make this stuff up.

  9. angryinch commented on Feb 14

    Hey Barry,

    Read the back and forth on this weekend. Looks like the bullys had their pitchforks out for you. No one likes messengers “bearing” bad news. Guess that’s why the job of messenger was such a high-risk profession back in ancient Greece.

    Those realmonkey bulls are girlie-men, IMO. The market goes down 2% and they are yelling about “panic in the streets” and immediately start pricing GOOG and AAPL call options.


    I’m not wishin’ and hopin’ for financial chaos, but something has got to shake these folks up to make them realize investing (whether in stocks or condos) is a risky endeavor. Complacency should be the enemy of bulls. Instead they embrace it.

    Shake it up, i say!

  10. D. commented on Feb 14

    Didnt’ the tulip mania last close to a century? For a 100 years the bears were right but missed out on the action!

    In the Weimar republic, the financial conservative also went to the poor house.

    The trick is to know when to follow a trend and when not get caught in the reversals. You’re lucky if your life cycle doesn’t fall into a reversal but at 4%, after 2 decades of rate cuts to stimulate the economy and not much room left to manoeuver, it sure looks like we’re getting close and closer to one and few seem to believe it’s coming.

  11. At These Levels commented on Feb 14

    Gasoline Helps Market

    I think this precipitous decline in gasoline futures is helping the market a lot and Dow 11,000 is again on the table. I don’t think that the market will make it far, but it should run some more if oil takes out 60, which it’s threatening to do. The VIX j

  12. D. commented on Mar 12


    It’s not stimulus, it’s prop-up!

    They are not making the bad debt disappear; they are just helping liquidity in a market that’s seizing up!

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