“There is only one side of the market and it is not the bull side or the bear side but the right side.”
– Jesse Livermore
“At least us old men remember what a real bear market is like. The young men haven’t got a clue.”
– Jeremy Grantham
Image: John Solaro via Flickr
With regard to the stock market, some people are true perma-bears while others merely adopt a bearish outlook when indicators suggest trouble ahead. There’s a big difference between the two.
Call it nature, nurture, or something else, but some people have a reliably bearish outlook. You know before they say a word which way they will lean. The same is true of perpetual bulls.
Perma-bulls and perma-bears serve a useful function: They pay attention to information the rest of us may overlook because it doesn’t fit our own biases. Occasionally they unearth important information we should heed. So, it’s important not to discount everything the perma-types say.
As for me, I’m not perma-anything. Academic research confirms that my attitude is the proper one: cautious optimism. I look for opportunity where I can find it. And I find opportunity all the time, even though some of it is out of my financial reach. There would be a dearth of financial activity if investors and entrepreneurs did not aggressively seek opportunity. Perma-bears may never get around to joining in the fun (unless maybe they think gold will rise), and perma-bulls get periodically taken to the slaughterhouse when a business-cycle recession unfolds.
Today we’ll review some unusually bearish indicators from several sources, not all of them perma-bears, who lean bearish right now, even as US benchmarks post new highs. You can discount what follows if you wish – but don’t ignore it. Next week I’ll do an “All Things Bullish” letter. Please note, I am not necessarily calling for an end to this amazing bull market. I’m agnostic about that right now, because the traditional forecasting tools have been taken to the woodshed, an issue I’ve talked about in many previous letters. So we simply have to diversify trading strategies as opposed to being permanently long or short anything.
Now, before we jump into the bear pit, let me announce an event that some of you will want to attend. George Friedman of Geopolitical Futures is holding a special one-day conference on October 25 at the Yale Club in New York City. The theme is “Rising and Falling Powers: Separating Signal from Noise.” George says he will reveal a blueprint for the future international power structure.
OK, let’s take the plunge.