• 26 Jun 2007 at 2:51 PM
  • Bears

More Bears in Bulls’ Clothing

grizzly-bear.gif Much like the record bearishness of equity research analysts, the fact that investment newsletter editors are considerably more bearish than they have been in the last couple of years may be a sure sign that the market still has legs. Evidence, from the New York Times:

The Hulbert Financial Digest, which has been tracking the investment newsletter industry since 1980, has found that the stock market performs far better, on average, after periods when newsletters are very bearish than when they are quite bullish.

The theory is that market tops exist when the predominant sentiment amongst investors is bullish, due to the nature of investors to pass on current trends as “predictions.” Since the bears are circling, the top may be far off. Today, the average short term investor newsletter newsletter recommends equity exposure of just 30%, down from recommendations of 71% 8 months ago.
There have been fewer bear sightings in circles of economists, where the general outlook is upbeat. The few polar bears that are in the mix are adamant that the economy is due for a tumble, however. The Wall Street Journal highlights one of its most historically accurate economic forecasters (also one of the most historically inaccurate in off-years), James Smith of Parsec Financial Advisors. Smith contradicts the consensus inflation adjusted GDP growth estimate of 3% in Q2 of this year and between 2% – 3% for the remainder of the year, thinking that GDP growth will shrink to almost 0% before rebounding in Q4 to 5%.
Are the GDP growth predictions of economists in the ballpark when compared to actual GDP growth? The Wall Street Journal looks at economist consensus forecasts of annualized GDP growth and shows that economists were off most in the late bubble and after the crash (1998-2002). The chart also demonstrates that the consensus forecast is pretty much always between 2% – 4%, which makes sense, since a consensus estimate will temper the extreme optimists and pessimists. Basically economists are spitting out something close to the historical average GDP growth in aggregate, which isn’t necessarily a good predictor of anything, especially in the last 10 years.
The Crowd Is Restless, but Maybe That’s a Good Sign [New York Times]
In a Sea of Optimism, Why Some Forecasters Warn of Recession [Wall Street Journal]

  • 28 Feb 2007 at 11:16 AM
  • Bears

Bear Raid On Wall Street

You really don’t need an explanation for this video, do you?

  • 27 Nov 2006 at 1:35 PM
  • Bears

Bear Fighting

This thirty-second video clip seems entirely appropriate for a day with 90% of the Dow trading down.

  • 20 Jul 2006 at 4:46 PM
  • Bears

Birthday Bear

richardrussell.jpgWe’ve always liked Richard Russell, the author of the Dow Theory Letters, the way we like that drunk old man down at our local watering hole. They’re both always full of bad news, telling us we’re wasting our money, not saving enough and generally headed for trouble. We try to ignore them but somewhere deep down we know they’re right.
Today Peter Brimelow pens a birthday card to Russell, who turns 82 on Saturday. He quotes a particularly “wise old man at the end of the bar” bit from a recent Russell piece.

The big picture that Russell has been writing about for several years is the move back to 1970s style-stagflation. As he put it Wednesday:
“I’m afraid that we’re very close to major trouble in the stock market. … If you can’t understand the basic deflationary background of the current situation, I don’t think you can understand what’s occurring. In my opinion, at this point, if nations don’t inflate enough — they’ll find themselves giving in to the forces of deflation. The massive debt position in the US is basically deflationary. All this debt must be serviced, and as rates rise, it takes an increasing amount of money to service the debt. … I’ll be most interested to hear whether Bernanke in his session with Congress indicates that he may boost rates again. Raising rates would be a mistake in the face of the weak real estate market and the problems of the cash-strapped consumers.”

Many happy returns for Richard Russell
[Market Watch]