Where are the Bears (And why are the Bulls so insecure?)
Is it just me, or have all the Bears been treed?
The Bulls are in chest-pounding glory. I feel like the last salmon-eating, hibernating, reality-based observer, who, according to the WSJ, writes in a "relentlessly bearish fashion." Guilty as charged. The caveat is that in October 2002, I was called a "hack perma bull".
My email hostility-o-meter has moved from yellow to red (but still has more room before its pinned), the trolls and sock puppets (new word for me!) have come out hiding. I keep hearing about the excess of Bears, but I neither see nore hear them anywhere. Sentiment is gloriously bovine.
Examples? Here's a selection of some recent RM commentary:
Shut Up and Run With the Bulls
Bubble in housing bubble-talk going limp?
And here's the ironic thing: the Bulls are so unbelievably insecure, you would think we were at Dow 2000, not on the cusp of Dow 12,000. Given how far and how fast this market has rallied, I have never seen a group of more insecure bulls in my life.
Even Jim Cramer exhorts (I assume tongue firmly in cheek) to his bullish brethren to Celebrate the Market, Quietly. "OK, I will go be quiet." he says. Is that sarcasm, or fear of offending the trading Gods?
It is as if every challenge to the mainstream data or bubblevision spin is a threat to their collective manhood.
Hey, don't be so defensive. The Dow is at all time highs, and you Bulls act as if I am accusing you of having tiny wee-wees. You remind me of the stand up comedienne, who everytime she sees a 50-something year old guy in a shiny new red Corvette, waves and yells, "Sorry about your penis!"
The Bullish argument is carrying the day, the market is up, Up, UP, and you guys are winning! Why so tentative? What is it that your lizard brains know that your frontal lobes hasn't consciously accepted yet? Gee, you would think the market is setting itself up for a shellacking, the way you are so self conscious.
Seriously: There are almost no Bears left standing. Enjoy yourselves -- its party time! Party like its . . . well, you know that song...
Saturday, October 14, 2006 | 02:46 PM | Permalink
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Both references to Prince songs were strictly intentional
Posted by: Barry Ritholtz | Oct 14, 2006 9:06:31 AM
You know the bulls like to climb a wall of worry. Better to keep the worry wall high so they can keep climbing.
Its the classic - momentum begets momentum. What me worried about fundamentals! Yeah, we are getting out of the scary Sept/Oct period into the perenially bullish Nov-May period and getting into the very bullish 3rd year of the presidential cycle.
Oil is down. Gold is down. Tech is up. Fed benign. Give me more beta!
Posted by: ab initio | Oct 14, 2006 3:01:03 PM
Not quite true: put-buying is increasing, at least if you believe the ISE's data. Cf a quick chart (PNG); call buying has been drifting down all year, though it has turned up a little lately.
Posted by: wcw | Oct 14, 2006 3:03:40 PM
Where are bears when you need them, the market is being completely hyped at the moment. Statistics show Sept and Oct as really bad months for the market, well in sept/oct the markets did well. What makes everyone think that the "bullish Nov-May period" will be bullish. ANYTHING CAN HAPPEN.
Wait till the bears get back to work, these gains will disappear very quickly, the talking heads on cnbc should keep their mouths shut..
Posted by: fred | Oct 14, 2006 3:22:01 PM
Wow. Emotions are definitely swirling on both sides.
1) This must be something truly unique. Chest pounding bulls but at the same time insecure? It seems akin to a wall of worry?
2) "Sentiment is gloriously bovine." - I would have to disagree here. Yes, I've read the articles and heard the CNBC cheer leading. So there is a good amount of bullishness out there. But most of the sentiment measures (ie. AAII, II, etc) have been much more extreme than it has especially given where the market is at. I think one reason is despite the bullishness, cash has been slow to follow the bullishness. People are bullish but do not seem to be putting as much cash to work as would seem by their bullishness. Your post would seem to confirm this as you ask "why so tentative?" Is this good or bad?
Posted by: Michael C. | Oct 14, 2006 3:28:07 PM
you know b, we are all a little insecure...
btw, we just fixed the budget deficit...didnt you hear? :)
Posted by: DD | Oct 14, 2006 3:28:52 PM
B, I read your blog for your clear and documented thought process. I do not expect you to be right all the time. I do expect you to be original, consistent, and intellectually honest. In that regard you're doing a terrific job.
WRT the bear suit that's been put on you by media types, I recall late 1999 when another original thinker, Jim Stack, was called a "perma bear" because his newsletter went 100% cash. His subscribers, myself included, missed the blow off....and also 2 years of perma losses.
Posted by: docdan | Oct 14, 2006 4:01:55 PM
they don't have him bear (bâr) for nothing...all of a sudden.
but I'd bet you are a lot more circumspect off camera.
Posted by: DD | Oct 14, 2006 4:31:40 PM
Right now I'm seeing an interesting pattern: over the past 2 or 3 weeks, a lot of long-time permabears and "contrarians" have thrown in the towel and suddenly declared that the market looks set to keep zooming higher. Marc Faber, Bernie Schaeffer, Doug Noland, etc. So have several of the regular posters here. Even Mr. Ritholtz, usually unemotional, is starting to seem fatigued! Sure, bearish sentiment may not be at its all-time lows, but it's dropped dramatically and the bears left out there don't have the self-assurance they once did.
This is anecdotal, I know, but seeing the bears so worn-down makes me think we're getting close to the top.
Posted by: anon | Oct 14, 2006 4:32:35 PM
Watch ads
I mean ads that sell expensive watches like the ones that Barry wants us to gift to him. Thses things are expensive toys that show a rather relaxed approach to dollars. Expensive toys that are not about time keeping. Expensive ads for expensive watches means that some people are not worried about money. I think it means be carefull what you buy, and look to things that might work well in an adverse situation.
All you macro heads wating for a crash are boring. Why not speculate on something wonderfull happening? It's about a point of view. Eventually you will be right. Eventually something wonderfull will happen. But when?
There has been specultion via Kurzweill on what will happen to govt./civilization as we know it, when human brains link up with computers and sources of information. The only thing we know for sure is that things will not be the same.
Please do not present the, that might happen but not in our lifetimes, argument, for the rate of change and work going on in this area is great.
There seems to be a bit of rear view mirror thinking going on here. How about some speculation on the future in ways that do not simply dress the past up in new clothing?
Something as minor as if we no longer needed something what would happen to the market? Or if politicians were held accountable how would that change gvt?
What if batteries that could charge up in 10 minutes and allow a car to go 500 miles were economicly created? What would that do to the companies that make parts for cars?
How would that effect those who build ships? What if we double the efficiency of energy transmission? See?
A set of possibilities and actions on many different scales might be viewed as preparation even if most of those scenerios will not happen? Also my neurons need the exercise.
"I just had my brain washed, and I can't do a thing with it!"
Later
Posted by: alexd | Oct 14, 2006 4:34:58 PM
The market is a bridge.
It doesn't know or care whether you're bullish or bearish, and it doesn't care what that ratio is.
It doesn't care if there's a party on the other side... and that many at the party are thumbing their noses at you for being a coward and not crossing the bridge to join in the fun.
It doesn't care if you've already made it to the party... or if you're half way across... or if you're on the approach and trying to decide, or if you'll never cross the bridge.
It's neither happy nor sad, whether you're fortunate or unhappy. It doesn't have a memory... It doesn't feel revenge or euphoria nor does it require justification.
It only knows it's a bridge and what its destiny will be.
Posted by: Eclectic | Oct 14, 2006 4:43:02 PM
Hi ! Today I wanted to destroy the myth that we are in a secular bear market. Here are the arguments backing the fact that we are still in a secular BULL market:
1) The Dow Jones, the Dow transports, the Russell have printed new all time highs
2) Only the Nasdaq and S&P are still below their 2000 highs because they have a heavy weight in tech stocks.
3) All emerging markets are at new highs
4) Even with the recent pullback, commodities are very strong
5) base metals have not corrected that much, indicating a strong global economy.
Frankly, I think all this sure doesn't sound like a bear market to me. The global economy is booming and US companies are making tons of money. I didn't hear any good arguments for the bearish case. Bears are always repeating the same thing over and over again, like the housing bubble, deficit, debt.......Face it bears, you got it all wrong, time to reassess your position.
Posted by: Nick | Oct 14, 2006 4:43:03 PM
Alex,
We appreciate your enthusiasm but I regret to inform you that we live under the govern of people who do not believe in science. the atom bomb was put here by g_d, it had nothing to do with physics. which is actually discussed on page 32 in your creationism 101 syllabus. we also take offense to the fact that you think we have money to fund proper education or even care about the proper education of our children when we have more pressing issues like building federal highways. anyway, though we do appreciate your concern.
Posted by: DD | Oct 14, 2006 4:56:59 PM
with 3rd and 4Q GDP #'s falling to less than 2% , earnings may fall in 2007 even though most strategists are looking for 6-8% gains in S&P500 earnings .... the question will be how will the Fed's possible rate cuts in 1Q 2007 jibe with earnings decline ... I assume the play will be long CMR / short CYC and long TLT ... time will tell
when I see bears such as Trahan become more bullish , I start seeing the last of the bears throwing in the towel .... he will be proved wrongly bullish with his sanguine estimates for 2007 as he was wrongly bearish this year
Posted by: jj | Oct 14, 2006 5:40:20 PM
Do you not think we have almost killed any hope of leading or taking charge of what the world is becoming, now and into the future. making civilizations more efficient and cleaner if for no other reason then simply being able to continue to inhabit this planet (Kurt Vonnegut calls humans a syphilis on the face of this planet)
we dig stuff out of the ground and BURN it. Then we cut down trees and literally wipe our asses with them. so lets see we dig stuff out of the ground and burn it, then we wipe our ass with a chopped down tree. Do you think the fluffy toilet paper comes from the healthier trees and that rough stuff is from...I bet you the whole process was moved to the place were it was cheapest and easiest to pollute. You would be better off thinking about things like this rather then GDP being up 1.5% or negative 1.5% because if you don't...you will get cancer and die.
Posted by: DD | Oct 14, 2006 5:56:19 PM
DD
what we want to know is , can we make money on those trees or not ????
Posted by: jj | Oct 14, 2006 6:06:00 PM
Fundamental Disconnect on strength of US Economy
It seems to me that it is impossible to have it both ways, you shouldn't have a strong economy and massive budget deficits. If the economy can't withstand the tax increases necessary to pay current expenses, it is by definition not strong. If the economy is strong, it should be creating budget surpluses.
We know there are going to be major fiscal crises in the near future (retiring baby-boomers, declining oil production). These are the best of times with baby boomers in their peak earning years. If we can't balance the budget now what makes us think that we can balance the budget (and pay off debt) in the future.
Posted by: km4 | Oct 14, 2006 6:09:48 PM
KM4
have you paid off your credit cards ? your student loans ? your mortgage ?
can you live within your means ???
the deficit this year was less than 2% of GDP , lower than 22 of 25 OECD countries
DEBT / GDP is 65% in the US vs. 66% France , 68% Germany , 160% Japan
while you may or may not agree on Keynesian fiscal stimulus , all of these countries are still surviving ...
the economy and the markets don't always collate ------- the fact that LBO's and MBO's take $8B / week of equity out of the markets on average this year , and Corporate Buybacks take out $1B / week may be a bigger factor affecting the markets than those that weigh on the economy
Posted by: jj | Oct 14, 2006 6:38:19 PM
JJ,
um yes...the fact that we dont care about the earth as we expand and the number of people using these resources around the world expands(rapidly) they become ever increasing in value. Buy what we need but there isnt that much of. Trees are not bad, lumber for housing and other construction...water is probably better. we like sweat baby...not some index tracking fund.
Posted by: DD | Oct 14, 2006 6:38:36 PM
Keep drinking the Koolaid, Nick.
Face it, Wall Street loves stealth inflation. Sales, revenues, earnings all rising steadily... not because of better business, but cheaper dollars.
Take all those nominal reports and deflate them per the PCE (not the fictional CPI) and you'll find things aren't so rosy.
Posted by: tj & the bear | Oct 14, 2006 6:40:56 PM
The bears are where they should be now- at the dance. The bulls are high on highs, getting adolescent in their triumphalism. You can't have a decent bear market till nearly all are full of bull. Bulls, in the last stages of their reveries get giddy in reaction to their underlying fear of heights - the higher the flight- the thinner the O2. That's where the silly season sets in.
You gotta go up to go down and while the liquidity is still there it's hard to look down.
It's an old saying: that you really can't recognize a bear market till you're in it. Higher costs will slowly saw away the limb that the bull has climbed out on. The bull will tremble as it takes a peak back and the plunge will only take place when the bull realizes it doesn't belong in a tree.
Posted by: zell | Oct 14, 2006 6:44:58 PM
Only market can be always right, so you know who are wrong: thoese are making complaints right now.
Posted by: Test | Oct 14, 2006 6:47:17 PM
http://www.oecdobserver.org/news/fullstory.php/aid/1507/GDP_and_GNI.html
Posted by: DD | Oct 14, 2006 6:52:00 PM
Well, the current run-up seems more the classic case of impatience on the “would-be-bears” – no one wants to miss out on a great party, right?
All the talk about “soft landings” and the housing bubble not overflowing into other markets is PREMATURE! These things don’t necessarily unravel in a few months, in fact things can stay “fine,” albeit fragile, for a long amount of time before “it finally hits the fan”… For all I care, go party with the bulls, but be very careful or you might wake up with a terrible hangover.
Posted by: Mike H | Oct 14, 2006 7:04:36 PM
DD:
None of us are tree haters. Trees are good.
But when a man's gotta wipe, a tree's gonna have to take one for the team.
Posted by: S | Oct 14, 2006 7:06:08 PM
