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A Request to Bearish Bloggers, the State of the Emperors Attire, and Watched Pots

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February 27, 2010 – Comments (20)

Okay, fair warning, this is another one of binv's crazy idea posts. But bear with me, I think the request part has some merit and I think the ideas I present will at the very least be a good read.

What are chances of this post actually mattering or accomplishing its goals: Well I put the odds of a big name bearish blogger actually reading this post at 1 in 10000 and the odds of them actually trying out this idea at another 1 in 10000. So I think this post has a 1 in 100 million chance of having an impact or conversely will be 99.9999999% ineffective. .... never tell me the odds :)

Basic Premise and Request

I want all of the bearish bloggers to tone down the overly bearish rhetoric for one month.

.... Whaaaaa? binv, what are you smoking?

Hear me out. I have a basis for this crazy idea. I actually had a very similar idea back in August: Do Your Part to Help End the Current Bull Market. Become a Bull!, but the conditions were not ripe for a top nor did I make a request as focused as this one is.

So I wrote in December that conditions are ripe for a top (The Long View). But if conditions are ripe, why am I asking bearish bloggers to ease off? Aren't things already in motion for the bearish case?

First off, nobody knows if this is the top or not. Not me, you, Robert Prechter, Marc Faber, Larry Kudlow, Jim Rogers, Paul Krugman or Nouriel Roubini. And like I have said before, whether this is the exact top or not, the only way we will know is after there is a confirmation move, and here is what one could look like: What To Look For As a Long Term Trend Change Confirmation.

But shouldn't the bearish bloggers continue to point out the problems? Shouldn't we continue to show that point of view?

In short: no.

The market is already extremely polarized. The bulls are exceptionally bullish (crisis averted, Dow 15000, financial system stabilized, etc.) and the bears are exceptionally bearish. There are very few who are agnostic on the market right now.

So what does ringing the alarm bell do when everybody has already chosen a side?

But if you subscribe to the bearish scenario, you want to see hubris peak again. Hubris had a very strong peak in Dec and January, with bullish sentiment indicators from a number of different measurement sources near all time highs.

Remember markets climb a wall of worry and fall down a slope of hope.

The Emperor Isn't Wearing Any Clothes (Almost)

The point that many of us bearish bloggers make is that the "recovery" was a product of a bounce off extremely oversold conditions in March and extreme fear. There was never any compelling bottom in valuations on a number of different fronts (earnings, book value or dividend yields). The GDP "growth" was a function of government spending and an inventory rebuild cycle (read: unsustainable).

And I bet any bullish reader reading this (which is highly unlikely) is getting angry and saying I am wrong / taking these things out of context.

That is more or less my point. These developments are not bullish and pointing out the unsustainability of the recovery and the fact that none of the underlying problems being fixed just gives fuel to the bulls "climbing the wall of worry".

It is like pointing out that the Emperor is *about* to be naked.

That doesn't work.

In March the Emperor was wearing a parka and several layers of thermal underwear. His attire was getting much more skimpy from March to November. In December and January, when many us of bearish bloggers were loudly pointing out problems and demonstrating the topping behavior on many indices across the developed world, the Emperor was wearing a Speedo.

But he was not naked. Saying he is "practically" naked doesn't work. So yelling "the Emperor has no clothes!" gives him an opportunity to put a t-shirt back on.

To catch the market with it's "pants down" they really have to be off.

So what I am saying is hubris and over-confidence needs to return. The Emperor really needs to be naked when the call comes that he isn't wearing any clothes. And the only way for him to be naked is for his charlatan dressers to convince him that "he looks maaahhh-velous" and to parade around Wall St. in his birthday suit.

Let me put this another way:

The Watched Pot Never Boils

On Caps there have been a lot of posts stating to the effect that "its okay to be bullish because the number of bearish posts have been increasing"

And you know what? That thought is absolutely right.

Because there is no such thing as "the market" and we all engage in it from the outside, separately. All of us, our words, actions, probably even our thoughts, make the market

Peaks happen at extreme sentiment, when everybody is one-side on a trade. They don't happen when there are a large number of people calling for the fall.

The watched pot never boils.

And bearishness did pick up back in January. There was quite a shift in sentiment. And in looking back on how that played out (Jan-Feb), it was almost a "too perfect" momentum change.

So What am I Asking?

I am *not* asking for the bears to stop being bearish. Hell, I am extremely bearish. I am asking for the bears to not be "loud about their bearishness".

We need to catch the Emperor naked and we need to stop anticipating a boiling pot and just listen for the clear whistle of a trend change.

Many of the bears are a) already positioned for a crash, and there are far more b) who will jump on board when the momentum changes.

I am asking for the group a) bears (such as myself and fellow bearish bloggers) to tone down the rhetoric so that hubris can re-peak unimpeded.

Please continue to post News and articles that show bearish developments, please continue with Technical Analysis and Wave Counts. We are all trying to understand the environment. Just refrain from the overly bearish rhetoric so that bullish complacency can return.

"Why do you hate the market so much binve?"

.... I DON'T!!!!

I am not bearish for the sake of being a bear. I would much rather be long. I would much rather be bullish. I am a very optimistic guy, and I want to invest in companies and the US economy for the long term. But when I honestly assess the problems that our economy faces in the near term (next couple of years) and the actions that have been taken to deal with those problems, I am utterly unconvinced that they are being solved or in some cases even taken seriously.

This is ultimately why I believe that the current environment suggests that investors should still be very defensive. That is my honest $0.02. I have no agenda other than to call things like I see them.

But my real beef with this stupid rally is that it is suckering in so many people and the only way to stop that is to just end the charade quickly.

If I actually believed that this really was a recovery, actual and sustainable, then I would be all over it.

I want to be long, and in fact I have no doubt that we will completely rebuild our economy and I will be 100% on board. I will become the most bullish investor you have ever seen.

.... but that day is not today, and other than a short bounce (in the grand scheme) that day was not March 9, 2009

I am not a "the world is ending, stock your bunker" bear.

I have a 5 month old daughter. I am not calling for the end of the economy because I want her to grow up in Mad Max's world! I want the economy to purge itself of its excesses so that we can rebuild our economy while America is still a very strong country and to clean the Financial house.

And that will not happen until we acknowledge the underlying problems and fix them. Yes, it will suck and be painful. But for the long term sustainability of the US economy, it is mandatory.

I want to leave my daughter an honest economy and a bright economic future.

.... So.

To the bearish bloggers: Tone down rhetoric for one month. And lets see if this market might give us the turn we are looking for. Patiently and quietly.

20 Comments – Post Your Own

#1) On February 27, 2010 at 4:39 PM, chk999 (99.97) wrote:

Interesting angle on things. I'm agnostic on market direction by the way.

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#2) On February 27, 2010 at 4:56 PM, portefeuille (99.66) wrote:

99.9999999%

99.999999%

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#3) On February 27, 2010 at 4:59 PM, Tastylunch (29.40) wrote:

who qualifies as a bearish blogger?

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#4) On February 27, 2010 at 5:42 PM, TMFCrocoStimpy (89.81) wrote:

lol @ port

right or wrong, it is important to be bloody well accurate!  :)

 

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#5) On February 27, 2010 at 6:16 PM, dragonLZ (99.33) wrote:

binve, I had a similar request back in August and so far, it has been working like a charm...  :)

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#6) On February 27, 2010 at 8:48 PM, EV38 (99.19) wrote:

I do have a "bullish" challenge to this statement. All of the bears analysis takes place over what happened the last 1 year. Ohhhh boy the market has risen 60% from the low, some stocks are up 400%, 500%, 1000% or more etc. This MUST be a bubble!!!

There's not enough analysis on where we are in the greater scheme of things. We are still 30% from the top, and 25-30% from the top in 2000. While gold is at all time highs and silver and copper are pretty close, aluminum is well off its highs and a stock like CENX is still over 75% off its market cap high.

While SPY is at 110.74 right now, from October 1998-August 2001, winter 2002 and from July 2004-Sept 2008, SPY has been higher. We are on the bottom half of the stock market's performance over the past 12 years.

And considering how technology and communication has moved along in the past decade, its a difficult argument to say that we are better off in 2000 than now, despite a high unemployment rate in the US. Maybe people are just more aware of their problems now than back then. Let's never forget the US doesn't live in a shell amongst itself either. In China they are experiencing labour shortages.

The most apparent consequence to this uneven economic growth is not a worldwide stock market decline but a long term, significant depreciation in the US Dollar. And once US assets like real estate and companies become cheap to foreigners, they will come in and buy the stuff up, propping up their prices.

One thing that's important to bring up is that market swings will be more violent. Deserving or not, the market will swing violently down at some point as a reaction to the violent swing up we have seen, of which was a byproduct of the first violent swing down we saw. So at least in the short term, it is valid to have bearish concerns, because there is a lot of money to be made for those who can catch the momentum, and a lot of money to be lost or missed out on for those who try to time tops or bottoms. 

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#7) On February 27, 2010 at 9:29 PM, binve (< 20) wrote:

chk999, Thanks :)

I'm agnostic on market direction by the way.

Gotcha man :)

portefeuille , You are correct

Tastylunch, Hey man :) I suppose anybody who writes bearish posts, either predominately or occassionally (if they are fundamentally bearish).

dragonLZ , good call

EV38,

Hey man :)

I do have a "bullish" challenge to this statement. All of the bears analysis takes place over what happened the last 1 year. Ohhhh boy the market has risen 60% from the low, some stocks are up 400%, 500%, 1000% or more etc. This MUST be a bubble!!!

Fair enough. But then, by your logic, how do the bears of 2007-2008 stack up (and oh yes, they did exist and were blogging about things)?

There's not enough analysis on where we are in the greater scheme of things. We are still 30% from the top, and 25-30% from the top in 2000. While gold is at all time highs and silver and copper are pretty close, aluminum is well off its highs and a stock like CENX is still over 75% off its market cap high.

That is something that I have been exploring in my long term and macro posts. Regarding equities and valuation on a 100 year timescale, very long term analysis of gold and the dollar and tresuries. People may not agree with my conclusions. That's fine. But I take issue with the statement that there has not been analysis done on the greater scheme of things.

And considering how technology and communication has moved along in the past decade, its a difficult argument to say that we are better off in 2000 than now, despite a high unemployment rate in the US. Maybe people are just more aware of their problems now than back then. Let's never forget the US doesn't live in a shell amongst itself either. In China they are experiencing labour shortages.

That is a good argument and one that I am not even remotely contesting.

That is another reason why I am so optimistic. We have made huge advances in technology, communications, and most importantly materials science. We have the brain power and resources to start a new science driven boom.

What I rail about repeadetedly, on the other hand, is financials. They comprise a disproportionate size of the economy relative to the economic good they perform. They are now simply a huge vamprie industry. For f**k's sake nearly all of the stimulus money went to bailing out financials! None of it went to the industries you mentioned above.

These post epitomizes my disgust with the US Financial System: http://caps.fool.com/Blogs/ViewPost.aspx?bpid=339577.

This fake, financially top-heavy economy has to be destroyed before a real and honest sustainable economy can take its place. And I believe it will happen, and that is the one I am waiting to invest in.

I am not looking for agreement, just relaying my opinion.

Thanks for the comment!.

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#8) On February 28, 2010 at 12:14 AM, uclayoda87 (29.35) wrote:

Rope-a-dope

 An old idea but it does have its merits.

 

 

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#9) On February 28, 2010 at 12:34 AM, Tastylunch (29.40) wrote:

My favorite bull quote of the day

"

GOFORAWILDRIDE (99.57) Submitted: 2/9/2010

You are bound and determined to get you rating under 20 with all them RED THUMBS.

Did you not look and see we are in the front wave of a BULL MARKET and all the BEARS have gone into hibernation.

You should cut off that RED THUMB you keep putting out there and start growing a garden with a GREEN THUMB as I have. "

 

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#10) On February 28, 2010 at 12:42 AM, Tastylunch (29.40) wrote:

oops forgot to link it

http://caps.fool.com/Pitch/SPF/4563382/standard-pacific-corp-standard.aspx

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#11) On February 28, 2010 at 1:25 PM, RonChapmanJr (33.19) wrote:

I think this request is assuming that CAPS blogs have a much larger influence than they actually do.  Does anyone really think that bloggers here influence anything in the real world?

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#12) On February 28, 2010 at 1:37 PM, Tastylunch (29.40) wrote:

RonChapmanJr

Does anyone really think that bloggers here influence anything in the real world?

That's an interesting question. Something as large as the market definitely not imo.

But I know Reaper has drawn the the interest of professional hedge funds and reporters while he was a here. And a couple blogs I posted exposing bad penny stocks drew some ire from their management/investors.

So I suppose you could say those two examples did have some sport of impact the real world, however small.

That was when CAPS blogs popped up in google finance though.

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#13) On March 01, 2010 at 10:15 AM, binve (< 20) wrote:

uclayoda87,

Exactly man! I have used the same expression a few times in the comments of my other blog. Nice :)

Tastylunch,

That was awesome! That is *exactly* the kind of over-bullishness we need to see!! I hope he starts a blog :)

RonChapmanJr ,

I actually think the Caps blog readership is surprisingly large. But nothing in comparison to the really big names. And like I said at the top of the post, this has a 1 in 100 million chance of being effective :)..

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#14) On March 01, 2010 at 3:49 PM, dragonLZ (99.33) wrote:

I don't think anyone has more influence on the stock market than Tasty...

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#15) On March 06, 2010 at 11:35 AM, ralphmachio (28.60) wrote:

This is kind of funny, although, I must confess, I have been thinking of similar ideas. I was thinking of saying that even I have sold my FAZ, and bought Citi. (which I seriously will do if things don't change SOON)

The rope-a-dope must be utilized in Colorado traffic situations frequently. If you want to pass someone, just start slowing down next to them. They invariably drive the same speed, right along side you. Then, when you slow them down enough, gun it and pass them. 

The Chinese Handcuff example is a very wise way to view the world, and usually comes from repeated experience of trying to go directly against a more powerful opponent and losing. Eventually, it becomes evident that you will get your way by submitting, to some degree. 

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#16) On March 06, 2010 at 11:45 PM, binve (< 20) wrote:

ralphmachio , Nice observations :) Thanks!..

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#17) On March 25, 2010 at 1:33 PM, cashkid79 (94.97) wrote:

I think if your pretty accurate on the market when you look closely then it might become scary to see things and have a pretty clear idea of what comes next given the stage that is set...

That's not really thinking you are making a difference though...but it could cause more active posting...

Liprie, TP

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#18) On March 25, 2010 at 1:35 PM, cashkid79 (94.97) wrote:

And in 10 minutes, it might even be exciting!!! Fluctuates, thats what markets do...short-term anyway

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#19) On March 25, 2010 at 2:30 PM, binve (< 20) wrote:

cashkid79 ,

Hey cashkid. I apologize for being obtuse, but I have read comment #17 a few times and I do not understand the point or context. Could you clarify?..

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#20) On March 26, 2010 at 12:20 AM, cashkid79 (94.97) wrote:

binve,

yes I could, but if you got it you'd have gotten it...and I got you...just not sure what to make of you...back to my studies :>

for the record, I really do see tech stocks going up, simply because of globalization and more people/businesses inter-networking and momentum, etc, etc...no big news there I think...

Liprie, TP

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