The Bears Are Wrong!

I would like to think that DOTE readers are among the best informed in the world. Week in and week out, I present the "bearish" case, often with data or charts. If you read this blog faithfully, you know all about the backsliding Housing Market. You know all about the grim long-term unemployment picture. You know all about the grotesque wealth & income inequality in the United States. You know all about impossible household mortgage debt and the government's growing public debt. Recently I showed you the savings rate and personal income data, which doesn't look good.

And that's just the economic side of things. I am not just a pessimist without cause. I didn't just wake up one day and say "things aren't looking so good, maybe the Empire's in decline, I think I'll start a blog about it." The declining Empire argument takes into account downhill trends that have been in place for almost thirty years.

There has been a spate of stories lately about Bulls versus Bears. The mood is decidedly bullish. America has turned the corner, we're back on a healthy (GDP) growth path. Much of this happy feeling emanates from the stock market being up. When stock prices are up and moving higher, even people who don't own stocks become crazed, or in the words of Alan "Bubbles" Greenspan, irrationally exuberant. So-called "consumer" confidence is strongly correlated with the DJIA (the Dow) or with the S & P 500.

As they have in the past, many now feel that the sky's the limit for stocks, business profts and the economy. Of course, when most people decide that Happy Days Are Here Again, that's when smart people start to worry—

Indeed, some market strategists worry that investor optimism itself may be a headwind to another strong year for the market. Consider how stocks performed in other recent periods of optimism. In October 2007, a survey by the American Association of Individual Investors found that 55 percent of investors were bullish; in the 12 months that followed, the S.& P. 500 fell 37 percent. Similarly, in March 2000, investor bullishness reached 66 percent. And a year after the fact, stocks were down 25 percent.

When Yahoo's Tech Ticker hired Dan Gross, formerly of Newsweek, I knew what was going on. Gross was hired to inject some much needed optimism into the discussion. The obvious problem was that everytime Aaron Task and Henry Blodget sat down to analyze some aspect of the economy, they ended up concluding that things were going to hell in a handbasket. Bringing Gross in was Yahoo's way of tempering their well-founded, sensible pessimism with some delusional happy talk. Optimism is popular. Optimism attracts viewers (or "eyeballs" as they're called in the business). Optimism is good for business.

Consider this post an open thread. The video below is entitled It's Official: The Bears Were Wrong! Watch it, analyze it. Be critical, be skeptical, dissect the arguments. If you are a regular DOTE reader, you are perfectly capable of understanding why the bullish sentiments expressed by Dan Gross are complete nonsense. Let me give you example. Listening to Gross, one could almost imagine that America has a trade surplus! Nothing could be further from the truth.

Feel free to comment on the video. I'm going to let you do the work today. Enjoy.

 

Comments

[Bill]

The problem with today's bears is that they still look at business fundamentals and, apparently, everything we know is wrong when the government and banking industry work together to manipulate markets. As you have pointed out, there are two economies - one blatantly manipulated by and for the insiders of finance and government, and the rest of us. There are and always will be opportunities to profit, but at this stage of the game one must suspend disbelief entirely in order to trade the tape, since there are no fundamental reasons for the tape to trade as it has been recently other than pre-determined outcomes.