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What will perma-bears do if the world doesn't end?

Recs

34

August 26, 2009 – Comments (57)

Because it hasn't so far, yet they continue to tell us it's only a matter of time. I'm not saying everything's great from here, but most of the panic has cleared, and it has only made certain screaming types more convinced that they're right. That, of course, is one of those things that characterizes cults and conspiracy theorists: the more they're proven wrong by reality, the more they retreat into alternate realities to justify their beliefs.

I have a deep dbout about people who refuse to change their opinions when the facts change.

Sj

57 Comments – Post Your Own

#1) On August 26, 2009 at 10:07 PM, booyahh (< 20) wrote:

i guess they'll hafta wait for the next crash before they can buy again !!!

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#2) On August 26, 2009 at 10:25 PM, alstry (35.99) wrote:

Who says a perma bear is a perma bear....maybe we are just bears because conditions are getting worse.

Sales Collapsing

Profits evaporating or being manipulated by accounting tricks

Millions losing their jobs

Tens of Millions sustaining massive wage cuts

Commercial Real Estate Crashing

Foreclosures rising

Advertising revenues shrinking

NOW....when things are getting better.....then we will document that....

NOTICE THERE HAS NOT BEEN A SINGLE BLOGGER TO FACTUALLY DOCUMENT HOW CONDITIONS ARE IMPROVING.....HMMMMM

MAYBE YOU COULD BECOME THAT BLOGGER.....SORTA THE ANTI ALSTRY;)

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#3) On August 26, 2009 at 10:41 PM, G8BigBoom (67.50) wrote:

Basically what you are saying alstry is companies are cutting unnecessary employees and really taking a look at the books to see how to save every penny. In the end becoming a more elite company and yes it is sad to say but sometimes layoff are in fact very good for a company actually I would argue most of the time.  By sales collapsing you don’t mean a bunch of idiots who shouldn’t be spending credit in the first place. I think most know the sales were most likely borrowed credit anyway. So maybe we should look at a more realistic buyer’s environment and not one high off credit. Wage cuts I would argue the same as layoff and are good in this economic time, even if they are very difficult to swallow. Advertising follows sales, less sales less money usually for advertising so this and sales could almost be link being one depends completely on the other. As for the Foreclosure deal and the mess it created will be with us for some time to come. But then again one person’s hell (yours) may be an entire generations American Dream “Mine”. With house prices being this low many first time buyers will find great deals for some time to come and the housing market will crawl at a snail’s pace out from this mess. But, it will grow….

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#4) On August 26, 2009 at 10:57 PM, alstry (35.99) wrote:

Based on my calculations.....85% of the current employees are unnecessary applying your standards and definition of "idiots."

In the last eight years, America and its government became dependent on debt to survive and thrive.  Now government is broke and it needs money.

Your dream will be a government that needs all of your assets to sustain itself at a fraction of the current size.....keep on dreaming baby...it will soon become your nightmare.

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#5) On August 26, 2009 at 11:07 PM, StopLaughing (< 20) wrote:

Europe has averaged about 10% unemployment for decades (about 40 or more years). I do not think Europe is a good model for the US but the US can live with 10% unemployment.

Japan has had massive deficits for at least a decade.  Again I think the US should start cutting it's deficit not adding to it. However, the US can survive the deficit if they stop adding to it. 

If the US insists on ballooning the deficit and government or if oil goes and stays above $200 or if interest rates go above 15% and stay there or a host of other difficult circumstances then the US could collapse. 

However, right now this looks like it is a new Secular Bull Market. The Nasdaq has broken it's Secular Bear trendline. If the S & P confirms that at about 1140 then this is a new  Secular Bull Market not a Cyclical Bull Market within a Secular Bear Market. 

More time and data are needed but I suspect that we are in a trading range between about 700 and 1500 on the S & P for the next 10 years or so.  I also expect a lot of volitility. The market is not afraid to go where it has been before.

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#6) On August 26, 2009 at 11:46 PM, FleaBagger (28.15) wrote:

The gradual decline of America into has-been world power is following the example of the decline of the Roman Empire, and is accelerating because of Wall Street, Pennsylvania Avenue, and Main Street, who are colluding (in Main St.'s case, shafting themselves) for the benefit of Wall St.

Is that okay with you, Seth? A gradual decline accelerating because of the theft of tax revenue to pay Wall St. muckety-mucks?

Oh wait. I don't care what you think. You're probably okay with the government's inflation statistics, okay with government printing money to give to bankers, okay with your 9% stock gains and 5% cost of living raise, because inflation is only 5%, the government tells us so. If that's okay in Bentworld, I don't want to live in Bentworld. I'll put on a tinfoil hat and stay in the asylum, because if one fifth of what Jack says is true, and the other four fifths are about aliens and illuminati, he's still 20 percentage points ahead of CNBC and the rest of the green shoots brigade.

And the longer you stay at TMF, the more you resemble a Wall St. muckety-muck instead of a Main St. hero anyway.

So the decline will be gradual. Yay. It will only take a little more hard work every year to achieve the same purchasing power. Yay. The government has promised a slow, predictable economic decline into Neolithia instead of a sudden collapse from which we could have recovered. Yay.

I'm very much disinclined to keep running up this down escalator while my freedoms are stripped away. If that doesn't suit your eternal optimism, sorry for bringing you down.

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#7) On August 27, 2009 at 8:32 AM, TMFBent (99.81) wrote:

The gradual decline of America into has-been world power is following the example of the decline of the Roman Empire...

Fleabagger, you're one of my favorites, so I'll speaks frankly to you: That train won't hunt. The dog has left the station.

I've studied way too much history in Italy to let a breezy comparison like that slide past. It's not possible to make comparisons of the U.S. to Rome without oversimplifying to the point of ridiculous. I'd accept a collapse analogy that looked for parallels to, say, 17th century Netherlands, or 18-19th C England, but Rome? (Which Rome, by the way, there were many variations in the continuum...)

Of course, no one will get any play with a bold statement like "the collapse of U.S. financial systems is akin to the silting of the formerly-rich harbors of northern Europe that began the long slow decline of the Netherlands and neighboring countries as merchant powers..." That's why you hear the Roman thing all over, and often repeated. Of course, it's been that way for decades. Whenever something's wrong in a Western country, people reach for the Fall of Rome analogy, just as earlier in this century, resurgences in Western countries (Nazi, alas) reached for the restoration of Rome symbolism.

(Before anyone gets smug about that, look at the architectural symbolism of that 1922 courthouse in your town square and remember what it's designed to evoke...)

The only reason the whole "fall of the Roman empire = fall of U.S." theme gets any mindspace is because most people have no idea what Rome was. They only think of morally repugnant behavior and military prowess. (Review the Life of Brian for a 1970s skewering of this simplemindedness.)

What the perma-bear thesis, and oversimplified-to-the-point-of-charicature theses like Rome = USA don't suit isn't my optimism, but my intellect. Wrong is wrong, no matter if it comes with a happy face or a frowny one.

A general suggestion: Perma-bears need to up their game and maybe learn a bit of nuance. If you look only for data that confirms your opinion and ignore everything else, you're no better than the eternal optimists. Of course, nuance and the capacity for changing your mind don't usually yield post recs akin to those harvested by continual grousing, but I'm sure we don't have any rec whorin' here at TMF do we?

;)

Sj

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#8) On August 27, 2009 at 10:00 AM, russiangambit (29.34) wrote:

What is your definition of a perma-bear? My defintion would be - it is someone who thinks the stocks are overpriced at P/E of 5.I don't think there is a single one on CAPS. Bears for the moment - yes, perma-bears - no.

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#9) On August 27, 2009 at 10:23 AM, outoffocus (23.16) wrote:

russiangambit  

Well I assume when he says permabear he means the Alstry's of the world.  And we do have a couple of those here.  However I've noticed that many bulls on this site label anyone who is skeptical of this rally a permabear.  I personally dont consider myself a permabear. Skeptic -yes, permabear- no.  What I seek, from this site especially, is to learn how to make money in any market.  I figure the way to do that is to look at the current facts, look at the market's reaction to it, then make my judgement from there based on fundamental economic theory and common sense.  I like to listen to the likes of Warren Buffett because what he say makes sense.  He says be fearful when others are greedy. It appears that each day more and more people get greedy.  So I think I have a right to be fearful.  Does that mean I'm selling all my holdings and hiding in a bunker? No.  But I did pocket some nice gains and am currently trying to hedge myself.  Sounds like prudent investing to me. If that makes me sound like a permabear to someone then maybe that person needs to look in the mirror and recognize they are a permabull.

 

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#10) On August 27, 2009 at 10:28 AM, leohaas (31.11) wrote:

"...learn a bit of nuance..."

That is exactly the problem here on the CAPS blog: the vocal gloom-and-doomers here have none! And by them repeating ad nauseam how bad things are, and how much worse things will be, they show that they are incapable of learning. Or is it more unwilling?

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#11) On August 27, 2009 at 11:11 AM, bigcat1969 (90.89) wrote:

You got off light FleaBagger.  Last time I tried a Rome-US comparison, I got felt sorry for.

With all due respect to you Sj, I think there are some similarities between Rome and the US.  Rome was the first to use money to run a massive empire.  They got the idea from the Greeks who got it from Lydia, who invented money (more or less).  They went in for spending in a large way and got the cash by looting others.  When that source of wealth dried up, they became a huge debtor nation.  Eventually they devalued the currency, that brought on inflation and then more devaluation etc... until they couldn't pay the troops that made the so powerful to begin with.

The US exploited land, invention and production to create a superpower.  Now the land is used, invention has spread across the world and production has largely left the country.  Yet we still spend as if we had all these and thus create debt. Like Rome (and almost every other empire), we spend on the military and feeding the masses (9 million folks on unemployment, millions more on food stamps) until our pockets are empty and we owe more than we can ever repay.

Then again as you point out there are other and likely better examples, as empires all tend to grow, overreach, stagnate and then fall.  Its just that Rome was in many ways the first great modern empire and so gets the PR.

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#12) On August 27, 2009 at 11:48 AM, chk999 (99.97) wrote:

I think perma-bears come out of some feeling that the wallstreet/us/world is a corrupt place that needs to be cleansed and that current valuations (however high or low they go) are artifically high. This is the same place that the US=Rome comparison comes from, as it is a popular theme of the moralists that Rome collapsed because of its excess and decadence rather than for more prosaic things like a decline in silver production.  

The real answer is that the overall world economy will keep growing as new knowldege allows new products and services and more efficient creation of old ones. But the growth will not be smooth or even but rather lumpy and with strong down drafts.

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#13) On August 27, 2009 at 11:57 AM, weg915 (< 20) wrote:

Nothing is  guaranteed .  Everything eventually  dies .  The question is one of  timeframe and impact.

 

Very few are permabears.   

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#14) On August 27, 2009 at 12:02 PM, ReadEmAnWeep (47.82) wrote:

They will just continue complaining that growth doesn't make sense, they are still right, and the world will end.

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#15) On August 27, 2009 at 12:04 PM, ReadEmAnWeep (47.82) wrote:

"That, of course, is one of those things that characterizes cults and conspiracy theorists: the more they're proven wrong by reality, the more they retreat into alternate realities to justify their beliefs."

 

Albert Einstein once said "The definition of insanity is doing the same thing over and over again and expecting different results".

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#16) On August 27, 2009 at 12:05 PM, ReadEmAnWeep (47.82) wrote:

"Who says a perma bear is a perma bear....maybe we are just bears because conditions are getting worse."

 

There would be a difference between a perma bear and someone who is bearish

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#17) On August 27, 2009 at 12:06 PM, ReadEmAnWeep (47.82) wrote:

"Who says a perma bear is a perma bear....maybe we are just bears because conditions are getting worse."

 

There would be a difference between a perma bear and someone who is bearish. But a doom and gloomer is a perma bear no matter how you look at it.

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#18) On August 27, 2009 at 12:07 PM, BigFatBEAR (29.14) wrote:

What will I do if the world doesn't end?

I believe I'll stockpile as much food and arms and water as I can, convert my lawn into a farm, and turn my swimming pool into a huge thing of Jell-O.

:)

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#19) On August 27, 2009 at 12:08 PM, jason2713 (< 20) wrote:

ReadEmAnWeep

They will just continue complaining that growth doesn't make sense, they are still right, and the world will end.

So you're saying we are growing?  We are still contracting despite the massive contraction that took place already.  A heavily in debt, unemployeed, consumerless economy isn't going to heal itself in 6 months. Sorry. Not realistic.  The market is over bought, and is being propped up not by investors.

Did you not see yesterday 2.1 billion of the 5.X billion shares bought went to 4 stocks?  How many down days have you seen since the beginning of this run?  I'm sorry, this is just too good to be true for how bad things are.

If the market did its normal up/down/up/up/up/down/down/up/up/up/down/up/up/down etc...basically an upward trend with a bunch of down days mixed in there, I'd believe it.

 

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#20) On August 27, 2009 at 12:12 PM, portefeuille (99.67) wrote:

But a doom and gloomer is a perma bear no matter how you look at it.

That is probably why Faber added the boom.

gloomboomdoom.com

 

 

 


 

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#21) On August 27, 2009 at 12:18 PM, portefeuille (99.67) wrote:

Did you not see yesterday 2.1 billion of the 5.X billion shares bought went to 4 stocks?

When will the U.S. media finally stop talking about the number of shares trades? "dollar volume" might be of interest but certainly not the number of share. Reminds me of the absurd way the Dow Jones index is calculated and "maintained" ...

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#22) On August 27, 2009 at 12:19 PM, ReadEmAnWeep (47.82) wrote:

"A general suggestion: Perma-bears need to up their game and maybe learn a bit of nuance. If you look only for data that confirms your opinion and ignore everything else, you're no better than the eternal optimists."

That is actually the quickest way to dismiss a blog, news article, or speech. It is usually really easy to tell if someone knows what they are talking about or if they just pulled a lot of random statistics to "prove" the view they already had.

In order for something to be scientific and logical you have to have a hypothesis, gather data, and state whether that hypothesis was right or wrong. You can't go back and change your hypothesis to make you seem right. Even worse, you can't change the data to make you seem right. Apparently, this isn't how they do it in law and policy making.

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#23) On August 27, 2009 at 12:28 PM, ReadEmAnWeep (47.82) wrote:

jason2713 :

Well, I didn't really mean growth like growth in the economy. I just mean rising prices. It looks to me like the S&P has been going up since march.

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#24) On August 27, 2009 at 12:43 PM, portefeuille (99.67) wrote:

share -> shares

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#25) On August 27, 2009 at 12:56 PM, G8BigBoom (67.50) wrote:

You know I have not enjoyed reading a blog this much in a long time. Great post and the argument was killer.

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#26) On August 27, 2009 at 1:04 PM, AdirondackFund (< 20) wrote:

What will the Perma Bulls do when 'cash for clunkers' runs out?

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#27) On August 27, 2009 at 1:33 PM, XMFSinchiruna (26.99) wrote:

I'm no permabear, as my CAPS profile carries the "Yes" charm, but I still find your above rhetoric offensive. Your derogatory employment of phrases like "cults and conspiracy theorists" is unconstructive to a respectful debate about the macroeconomic landscape. You can do better than that.

As fascinated as you seem to be by the mindset that leads investors to mistrust the present rally, I am equally fascinated by those who cling to the pre-collapse economic model as something that we should go back to suckling as though we've learned nothing from the crisis. If derivatives were a root cause, and rather than deleverage those "assets" we've only doubled down the bet with taxpayer money and shielded banks from write-downs with accounting hocus-pocus, then how can a market rally be perceived as anything but a dead-cat bounce? There's no tinfoil hat here ... just a very rational question that anyone declaring a new secular bull market needs to address.

Furthermore, to ridicule investors that are uneasy with the scale of sovereign debt and projections for its further doubling by 2019 is discompassionate of a perfectly legitimate cause for macroeconomic concern. The public record offers plentiful evidence of a looming end to the rule of the USD as the world's dominant reserve currency. Historically, such currency reserve shifts have not gone smoothly, and we've never experienced such a shift in a purely fiat global monetary regime. Again, such a prospect offers legitimate and rational causes for concern.

There is clearly a massive philosophical divide which distinguishes these two prevailing biases, but my hope is that The Motley Fool can continue to serve as a refreshing oasis where both approaches find tolerant and respectful debate based upon verifiable evidence rather than derisive rhetoric.

Bent, this is not the first time I've requested that you consider toning down your unwarranted aspersions against those of your fellow Fools that might not share your rosy macroeconomic outlook. If you believe that you have nothing to learn from Fools with a more cautious outlook, and you look down upon them in the way that your post suggests, then perhaps you might consider whether you might be "retreating into an alternate reality to justify your beliefs". The point of debate is to test hypotheses and learn, and again this is what makes CAPS such a very special place.

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#28) On August 27, 2009 at 1:45 PM, portefeuille (99.67) wrote:

I'm no permabear, as my CAPS profile carries the "Yes" charm, ...

In how far does a "'Yes' charm" signal a non-"permabear"?

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#29) On August 27, 2009 at 1:51 PM, outoffocus (23.16) wrote:

In how far does a "'Yes' charm" signal a non-"permabear"?

Why would a permabear have all greenthumbs unless all the greenthumbs are short etfs? I would think its generally accepted that if you have the Yesman charm that you are a bull.  I can't imagine too many instances where that would not be the case.

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#30) On August 27, 2009 at 1:53 PM, wuff3t (98.50) wrote:

"What is your definition of a perma-bear?"

One who is permanently bearish. "Perma" just means consistently, rather than the depth of the bearishness.

TMFSinchiruna, your most recent comment is mostly fair, but in TMFBent's defence perhaps he's just reacting to the equally forceful rhetoric of some of the bears? There seem to be an awful lot of people on both sides of the fence who blog on TMF just to vent their spleen, even if their remarks are based on nothing more than emotion. I really enjoy and appreciate those who take the time to explain their views and back them up with historical evidence or contemporary fact etc (as you did), but sometimes you just think "Good lord, why has someone just wasted my time making me read this...?!"

I guess I'm basically agreeing with your desire that TMF remain an oasis for education and tolerance (I have learnt far more from both the bulls and the bears on this site than all the other financial sites I've read put together) but (and not having read as many of Bent's blogs as I'm guessing you have) maybe he's as fed up with intolerance as you?

Best,

Phil

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#31) On August 27, 2009 at 1:56 PM, bigpeach (26.01) wrote:

Come on Sinch, don't be so sensitive. I didn't see anything in Bent's post that was more offensive than the stuff you write. He just wants to know what people like you are going to do if you're wrong. I noticed you didn't address that in your reply.

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#32) On August 27, 2009 at 1:58 PM, TMFBent (99.81) wrote:

Your derogatory employment of phrases like "cults and conspiracy theorists" is unconstructive to a respectful debate

You may think so, but I'm just pointing out where I see striking similarities to cults and conspiracy theories, and the usual permabear logic, or lack thereof. If that offends you, you'll have to take responsibility for that. Those who engage in months-long fits of confirmation bias (I've done it from time to time) and never come up for a breath of reality are doing themselves a disservice. There is definitely a cult of the permabear on CAPS. I've been accused of  being a ringleader, even.

Bent, this is not the first time I've requested that you consider toning down your unwarranted aspersions against those of your fellow Fools that might not share your rosy macroeconomic outlook.

You must be kidding, right? I can't make a generalized zinger about something I see as an amusingly self-destructive group delusion? This isn't the blog for you if you are looking for ways to avoid being offended by strong lingo, that's for sure.

It's the first such "request" that I remember. And sorry, but it's denied, because it's misguided. Reread the OP. I criticized no specific person, nor even the den of permabears. I wasn't referring just to the blowhards we have in CAPS (we know who we are) but to permabear blowhards everywhere. Those who choose to take a general criticism as a personal attack will have to turn to themselves for something warmer and fuzzier, because they're not going to find it here.

The point of debate is to test hypotheses and learn

Not really. That's the point of experiments. There's no testing a hypothesis in a debate. The point of debate is something else. Some would argue it's to learn. More would probably argue that the point of a debate is to win others to your opinion. That, at least, is how debate team seems to work. I don't know that I saw a debate prize for "learning." But then, I wasn't on the debate team.

But I agree, the point of TMF community interaction should be to learn. That's why the original post points out the strange disconnect between reality a bearish investor like me sees, and the reality as seen by the permabears.

your rosy macroeconomic outlook.

I had to reread this a couple of times to make sure I wasn't imagining it. If that's your characterization of my opinion on the economy, then you haven't done your TMFBent homework. Listen to a few of our fool podcasts, review more of my blog posts and articles, and you'll soon realize that I have nothing close to a "rosy economic outlook."

If "not so great" isn't grim enough for you, then by all means, keep at it. But please don't pretend that my degree of economic pessimism (moderate) becomes rosy optimism because it doesn't measure up to some perma-bear yardstick.

Sj

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#33) On August 27, 2009 at 1:58 PM, portefeuille (99.67) wrote:

I would think its generally accepted that if you have the Yesman charm that you are a bull.

Not sure about that, but if it is indeed generally accepted then this is another proof showing that quite a few don't understand what "out/underperformance" vs. a benchmark means.

 

 

 

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#34) On August 27, 2009 at 2:01 PM, bigpeach (26.01) wrote:

Why would a permabear have all greenthumbs unless all the greenthumbs are short etfs? I would think its generally accepted that if you have the Yesman charm that you are a bull.  I can't imagine too many instances where that would not be the case.

Green thumbing in itself is neither bullish nor bearish. CAPS is relative performance, which makes it possible to be a bear with all green thumbs and vice versa.

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#35) On August 27, 2009 at 2:10 PM, FreundInvesting (29.46) wrote:

Sinch - I agree. Bigpeach, he basically said all bears are "cultists" not looking at all the information. That's simply not true. We're just looking at it differently. My guess is that Bent didn't see the crash of 2008, whereas some of us bears did. I certainly wasn't here gloating about how bulls are all "cultists" who stuck by their guns even when presented evidence otherwise.

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#36) On August 27, 2009 at 2:17 PM, outoffocus (23.16) wrote:

bigpeach & portefeuille

Those are both good points. But I didnt say there were no instances where one would be a permabear and greenthumb.  I said  I can't imagine too many instances where that would not be the case.

In other words, out of the 66000 accounts on CAPS, I can't imagine there are too many "yesmen" that are permabears.   In a game like CAPS where you dont lose any real money, why wouldn't you take advantage of the opportunity to express your true permabear feelings? Also I would believe that most permabears short stock. Why wouldnt you want to track your "relative performance" in CAPS?

Now of course, not being a permabear, I'm merely speculating.  But my speculation is based on what I've learned so far from the true permabears on this site.

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#37) On August 27, 2009 at 2:33 PM, TMFBent (99.81) wrote:

he basically said all bears are "cultists" not looking at all the information.

No, I said that many permabears only look at information that confirms what they already believe, and this is a behavior shared by cult members and conspiracy theorists. 

My guess is that Bent didn't see the crash of 2008,

Your guess is 100% wrong. I was the one of only a couple analysts predicting a down market for 2008 in an early 2008 issue of Fortune and wrote about the possibility/likelihood of a consumer-spending led collapse extensively even before then (and after) here at TMF.

This is precisely the kind of  conclusion-before-research research that makes me wonder how some people can be so sure of their opinions.

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#38) On August 27, 2009 at 2:36 PM, portefeuille (99.67) wrote:

Some "caps" game players choose stuff with a very low beta. Consider this example. A "new" player chooses 200 stocks/funds that "behave like money market funds" and makes "outperform" calls on them. If the benchmark now "goes on to lose 50%" he gets around 50 score points for each, and his "caps" game "accuracy" of 100% and his ca. 10000 score points could make him #1 in the "caps" game.

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#39) On August 27, 2009 at 2:39 PM, portefeuille (99.67) wrote:

#38 ..., which again demonstrates how highly "unintelligent" the "caps" game scoring system is.

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#40) On August 27, 2009 at 2:42 PM, jason2713 (< 20) wrote:

Go bulls, make that paper!   I'll watch from the sidelines making my 3-5% interest in safe haven investments.

I'd rather have tiny gains than risk huge losses based on an over bought market.  There are still deals out there, I just haven't found one yet.  When P/E ratios are starting to get pretty high that's an over valued market.

Example P/E's: goog = 32, AIG =who the f*ckknows since they lose tons, APPL = 29+, VMW = 46, BAC=29,C=who the f* nows since they lose tons, etc ect

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#41) On August 27, 2009 at 2:57 PM, XMFSinchiruna (26.99) wrote:

TMFBent

No hard feelings, felow Fool ... I'm just standing up for tolerance of multiple perspectives and the beauty of respectful debate, which are virtues that I know you share my passion for.

bigpeach

"I didn't see anything in Bent's post that was more offensive than the stuff you write."

Links??

"I noticed you didn't address that in your reply."

One has to trudge through the unsound premise that bears have somehow been "proven wrong by reality" before leaping to a discussion about shifting investment strategies.   

Let me point out a few things here. Speaking of nuance, how about conceding that not every investor who is wary of this equities market must be presumed to anticipate a complete collapse of the social order. Every individual has his or her own concept of potential scenarios, and lumping them together with labels is not reflective of intellectual scrutiny.

For me personally, as one who correctly called a major equity crash many months in advance of the event, even a situational bear like me was taken aback by the abrupt and indiscriminate nature of the 54% reteat in the Dow and the notable bankruptcies that accompanied it. Whatever my personal expectations of a game-altering equity correction were, the reality that unfolded made my expectations appear tame. I pictured a far more prolonged and gradual event as a consequence of deep fiscal deficiencies and systemic risks represented by the $600 trillion derivatives monster, and in my estimation those causal factors have not subsided in the slightest. The point is, I was humbled by the depth of the fall, and in truth we all need to remain similarly humbled.

The markets will continue to mystify both camps in its unpredictable swings, but the cracked fundamental foundation of the U.S. economy represented by insurmountable debt and a forestalled deleveraging process strikes at the heart of this Fool's unease with the present declarations of recovery. If a preponderance of the evidence shifts, and green shoots mature into trees, I will gladly whistle a new tune. If gold retreats back to below $500 per ounce, then we can start talking about a return to normal market conditions, but I believe that gold at $940s is trying to tell you something.

Again, these are just one Fool's opinions. I'm not trying to shove my views down anyone's throat, and if anyone has ever thought that of me I apologize. I enjoy encountering bullish perspectives here on CAPS, and consider every well-researched premise a valuable contribution to our community's ongoing discussions.

 

 

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#42) On August 27, 2009 at 3:54 PM, TMFJake (32.69) wrote:

portefeuille, give me 200 stocks that will break even when the S&P goes down 50% and I'll say you deserve a high rating. :)

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#43) On August 27, 2009 at 4:00 PM, portefeuille (99.67) wrote:

#42 There are quite a few of those. An example is this. Quite a few "move even less".

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#44) On August 27, 2009 at 4:11 PM, portefeuille (99.67) wrote:

(you are the IT guy. If you find the time you might want to check the database to see how many "really low" beta ones there are. You might consider not allowing those for the obvious reason that the S&P index is an utterly inadequate benchmark. Which brings us to the benchmark issue. zzlangerhans has put it quite nicely here.

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I'm not sure it's good to be a Fool these days, so I'll refer to myself as an Idiot when asking this question I'm sure has been asked and answered many times.

Why is our stockpicking performance measured against the forward performance of the S&P index? By what economic theory is this not a completely arbitrary metric of the value of our judgment?

Hypothesize two financial advisors, Bareman and Bulgai. Both are avid CAPS players and generate most of their accounts through their CAPS ratings. A year ago both of them decided to put a rating on Transionic Radiation Devices (TIRD) when it was trading at 10. Bareman gave a red thumb and recommended a one year short position. Bulgai gave a green thumb and recommended going long for a similar time course.

Over the next year TIRD steadily dropped to 7, a 30% decline. In the same time period the S&P dropped 40%. A 1000 share short based on Bareman's call would have profited $3000. The long investment recommended by Bulgai would have lost $3000. Although Bareman made money he wound up losing 10 CAPS points. Bulgai crapped the bed but made 10 CAPS points.

Despite the CAPS ratings you decide Bareman is the guy for you. Unfortunately when you contact him he tells you he had to sell his business to Bulgai since his <20 CAPS rating couldn't compete with Bulgai's 99.4.

Is this metric based on the assumption that all monies not invested in equities are placed in an S&P index fund? Why make this assumption? Why not cash? Or an S&P short fund? Or grade A Colombian white? If the market is going to tank, I want to be short or I want to be out. I don't want to be long in equities that don't suck quite as much as the others. And if you devalue the scores of the market callers, how will I know who to listen to? 

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The 5 annoyances of the "caps" game ... "accuracy", (inadequate) benchmark, $1.50 rule, $100M rule, U.S. exchanges only. Could you maybe do away with at least one of those? 

 

 

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#45) On August 27, 2009 at 5:19 PM, TMFJake (32.69) wrote:

#43 I'll see that you are selecting bonds and factor that into my thinking about your stock picking abilities.  Over the long haul, you won't do will in CAPS unless you can adapt the beta characteristics to keep one step ahead of the market.  do that consistently with your 200 picks, and you will deserve your high score.

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#46) On August 27, 2009 at 5:35 PM, portefeuille (99.67) wrote:

I'll see that you are selecting bonds and factor that into my thinking about your stock picking abilities.

As you can see in comment #38 above I was talking about "stocks/funds". The example I gave is an ETF. I assumed that "stocks" in your response in comment #42 was "shorthand" for "stocks/funds".

Over the long haul, you won't do will in CAPS unless you can adapt the beta characteristics to keep one step ahead of the market.  do that consistently with your 200 picks, and you will deserve your high score.

I am not sure whether by "you" you mean me or just any "caps" game player. I don't know what you mean by "adapt the beta characteristics". I mentioned something "similar" in the context of the "caps" game benchmark (the S&P 500 index). Maybe you referred to that earlier comment of mine.

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#47) On August 27, 2009 at 5:40 PM, portefeuille (99.67) wrote:

... and I'll say you deserve a high rating. :)

, and you will deserve your high score.

I did not "get" the meaning of these comments. I guess you refer to my "caps" game "rating/score".

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#48) On August 27, 2009 at 5:43 PM, portefeuille (99.67) wrote:

... and factor that into my thinking about your stock picking abilities.

Another comment I don't understand.

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#49) On August 27, 2009 at 5:49 PM, portefeuille (99.67) wrote:

I am mostly unaware of what others "think about my stock picking abilities". Some have commented on that "ability" and I believe they think I do "alright".

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#50) On August 27, 2009 at 5:49 PM, TMFJake (32.69) wrote:

#46 yes, it's an ETF that tracks the price and yield of a bond market.  and if any CAPS game player can consistently make the correct macro call to go all into low beta or high beta stocks (per your comment in #44), then that player will deserve their high CAPS player rating and would generate huge profits with a portfolio that hedged against the S&P 500.  :) 

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#51) On August 27, 2009 at 6:04 PM, tonylogan1 (28.17) wrote:

no rec from me.

While the rome vs US analogy may be "over-used" vs neitherlands, you should not dismiss out of hand any comparisons between the two and learn lessons.

Of course Rome and the USA are different! And of course the more a person knows about anything, the more everybody else seems to be a complete idiot on the subject, but geeze... lighten up.

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#52) On August 27, 2009 at 6:10 PM, portefeuille (99.67) wrote:

..., then that player will deserve their high CAPS player rating and would generate huge profits with a portfolio that hedged against the S&P 500.

I should think a simple put option should do.

The benchmark is a problem that should be fixed (see the post by zzlangerhans).

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#53) On August 27, 2009 at 6:25 PM, XMFSinchiruna (26.99) wrote:

TMFBent

P.S. I apologize for mischaracterizing your market outlook as "rosy". Now that you mention it, I thought I had encountered some cautiousness within your prior posts, and looking back I was just reminded of our common ground in the early phases of the crisis.

I also discovered I was thinking of someone else in reference to having had a beef with an earlier post. Again, I apologize.

 

As an anthropologist and the son of an English professor, the linguist in me needs to make another point about select words and phrases that have lost their utility due to misuse or an accumulation of triggered assumptions and characterizations.

The label "permabear" is a terrific example of a useless word, and joins terms like "conspiracy theorist" that belong in the recycling bin of the English lexicon. Just like the word "bubble", sometimes it's careless deployment that renders a word or phrase useless in reasoned discussion. "Permabear" does not connote a scale of bearishness, but rather a permanence to the negative outlook for equities. I suspect that a large percentage of the people you would pin that label to would dismiss it as a mischaracterization of their views. I look forward to becoming bullish on broader equities once some structural flaws are culled from our fundamental predicament (could be 2 years? 5? 10?), which makes me a conditional bear rather than a permabear. :)

As for the phrase "conspiracy theorist", I may agree with Paul Farrell that the Fed itself in its secrecy and well-documented ties with powerful banking interests qualifies as a conspiracy against the interests of the American people at large, but that doesn't make me deserving of the kind of vitriole and presumptions of flawed logic that people have conditioned themselves to feel when they hear the phrase.

I suspect a likely conspiracy to cover the truth behind the mysterious $134 billion bond scandal from last June, but there's no cult mentality nor flawed logic behind that reasonable suspicion.

Even the admitted discussions between Paulson and Ken Lewis regarding the witholding of information on the Merrill deal from shareholders would appear to represent a conspiracy by definition.

The point is, conspiracies irrefutably occur. People are convicted of criminal conspiracy every day within our courts. Unfortunately, reasoned discussions of conspiracies where they do appear to occur is blocked by the massive set of flawed asumptions that are evoked by the phrase "conspiracy theorist". This was another source of frustration I had with your original post. You employed two back-to-back phrases that I believe have lost all constructive meaning within our national lexicon.

 

Again, no offense intended by my impassioned response. It just seems to me that bearish Fools are often verbally assailed for their views, and I do get defensive when people come under attack for their points of view, beliefs, etc.

 

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#54) On August 28, 2009 at 7:38 AM, TMFBent (99.81) wrote:

Sincharuna. Cool, we can hug it out. My beef isn't with bears or cheerleaders, it's with perma-everythings. I was merely trying to point out in the OP that some of us (you and I and others) were on the front edge of the bear thing, and then came a flood. Now that things have changed, some of us (not you, but I) don't think the end of the world is here. But there are permabears out there (agree, a less-than-specific category) who refuse to acknowledge the alternative data, and who show up to berate anyone who does ponder that data as some kind of Bambi.

@ someone: Why is our stockpicking performance measured against the forward performance of the S&P index? By what economic theory is this not a completely arbitrary metric of the value of our judgment?

This is a very good question. I won't answer for the CAPS team, but here's what I believe is behind TMF's original (and continuing) dependence on benchmarking vs. the S&P 500: Inertia.

Back in the days of few or no ETFs, S&P 500 indexing funds were about the only really low cost way to capture market gains (and losses) while doing little work. Thus, it seemed a pretty good benchmark for a person's overall portfolio. I'm not so sure that's the case anymore, for several reasons. First, there are plenty more ETFs out there, some of which may be more appropriate benchmarks for various lists of stocks or portfolios.

As for CAPS, I suspect the decision to base scores solely on outperformance relative to the S&P500 has been made for simplicity's sake. CAPS is at its heart a game and it doesn't work if the rules are too complex. People won't play. The bar for understanding and participating needs to be kept low in order to get participants. Thumbs up or down, versus the wide-market large-cap index.

I agree that it makes absolutely no sense at all that a position that loses money but earns caps points, as in your TIRD example, can be seen as a winner against a short position that earned real money but lost caps points because the stock's downward volatility didn't match up with the S&P 500's over that period.

To me, the most obvious takeaway is not to get too attached to anyone's CAPS score or performance, at least as a measure of real investing prowess. I retired from CAPS when playing the game was just too much work. I was (I think) still in the top 20, and had spent plenty of time in the top 10, but what I was doing in CAPS was nothing even close to investing. Indeed, it was not even likely possible with real money.

In general, I think that if anyone's worked up about CAPS, he probably ought to lower his expectations a bit. This is a fun experiment in group market dynamics. It ain't investing. There may be derivatives from CAPS that can be used to inform investing strategies, but they come from a game that too limited in scope to be analagous to real-money investing.

Sj

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#55) On August 28, 2009 at 9:51 AM, TMFJake (32.69) wrote:

Seth, thanks!  I think you accurately summarize the selection of the S&P as a benchmark for measuring stock picking ability.  Using the S&P is a simple but relevant way to determine if you calls provide any additional information beyond market movements generally.

I understand the cognitive dissonance around the TIRD example, but as I noted in the post that porte references, if you assume Outperform calls are constructed Long Ticker / Short S&P and Underperform calls are constructed Short Ticker / Long S&P, it makes perfect sense.  The Underperform call on TIRD didn't necessarily communicate any information beyond the general downward direction in the market.

We do score CAPS players on their performance without the implicit S&P hedge, on only their Outperform calls, on only their Underperform calls, and this information can be viewed from the Top Tens page.

As has been discussed many times before, CAPS isn't designed to evaluate players are portfolio managers--and, and this is where all the controversy comes in, the incentives in CAPS lead many people away from real-money investing strategies.  For our experiment in extracting collective intelligence, this is a good thing.  We're not looking to identify the best portfolio manager.  We're looking to aggregate as much intelligence as possible to identify stocks with the best return expectations.   

It will be a natural extension to CAPS to build a portfolio platform in the future, and, with a little luck and success, I hope we do just that.

 

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#56) On August 29, 2009 at 10:55 AM, MKArch (99.70) wrote:

Alstry,

Please read through Bob Johnson's articles since the collapse of the economy last September. He made a bold but dispassionate call that leading indicators like ISM were starting to turn positive last winter and if you actually read his work without bias you will see the argument for why thing are getting better. In short just like you have to crawl before you walk, the rate of decline in things like job losses and revenues has to slow down before it turns north and not all indicators are created equal for instance unemployment has always been a lagging indicator of economic recovery.

 I'll add my own take that Bob Johnson does pick up on a bit lately that this recession was one of confidence rather than over capacity. When Lehman went down and every commentator on earth was proclaiming the end of the world is nigh businesses decided to shoot employees first and ask questions later. I thought this was the case as it was happening all the panic was just creating a self fulfilling prophecy and Bob's articles lately about  worker productivity being unusually high in this recession as employers cut below levels of demand confirms what I always thought to be true. I also always thought his thesis that employers will need to scramble to hire employees back when things do turn around would be the case as well.

I hope you take the time to read through his articles thoughtfully and dispassionately as he has been almost right on the money. The answers you seek are here if you give Bob a fair chance and don't dismiss him out of hand.

http://news.morningstar.com/archive/archive.asp?inputs=authorId=696

 

Mike

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#57) On August 29, 2009 at 11:56 AM, MKArch (99.70) wrote:

If you only have the patience for one article I recommend this one.

 

http://news.morningstar.com/articlenet/article.aspx?id=286040

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