‘Permabear’ is a term used for pundits like Societe Generale’s Albert Edwards or newsletter writer Marc Faber who predict market calamity on a weekly or monthly basis without respect to recent market activity.
Permabears are really only the tip of the iceberg, though. The number of pundits who are pessimistic 60 or 80 per cent of the time is far larger than the count of devout permabears.
The end result is that there is never a shortage of dramatic calls for catastrophe so when anything truly bad happens in markets, business TV will find someone to gloatingly announce: “I told you so, but you wouldn’t listen.”
The Financial Times’ (free to read with registration) Alphaville site discussed this phenomenon in “The hunt for the next Nostradamus.”
“To state the obvious: for every buyer there must be a seller. Wild views about future market events, long or short, should be treated with the same scrutiny. Claims that Tesla is going to $4,000, or the Fed’s quantitative easing program is going to cause hyper-inflation, should be judged on their merits, not on the extent to which they tap into fears over another crisis… Brave, contrarian predictions are supposed to lean against the kind of herd mentality that drives exuberant valuations. Think Templeton during the Nasdaq bubble for instance. But perhaps the bubble is now in predicting the next systemic crisis, rather than assuming everything will be OK.”
As Alphaville points out, this doesn’t mean investors can always ignore pessimism. New short positions put in place by famed fund manager Jim Chanos, for example, are always worth further research. It is a key point that Mr. Chanos has been correctly bearish numerous times on many short trades, not just once. As a foreign exchange trader once told me, “It’s easy to be bearish, you have to be bearish and make money.”
- Source, Globe and Mail
