Are Bears really more rigorous than Bulls?

Monday, February 13, 2006 | 04:31 PM

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 Incompetents.”

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 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.

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. . .

Monday, February 13, 2006 | 04:31 PM | Permalink | Comments (11) | TrackBack (1) add to | digg digg this! | technorati add to technorati | email email this post



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» Gasoline Helps Market from At These Levels
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 [Read More]

Tracked on Feb 14, 2006 12:06:17 PM


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?

Posted by: anon | Feb 13, 2006 4:59:38 PM

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