Being a Permabear is a recipe for disaster.
The meaning of a Permabear, characterized by persistent pessimism about market prospects, is fundamentally flawed and historically disproven. This approach not only defies logic but also contradicts decades of market data. Consider the case of Robert Prechter, a notorious Permabear who predicted a Dow Jones Industrial Average (DJIA) crash to 1000 in 1987. While the market did experience a significant drop that year, it rebounded swiftly and continued its long-term upward trajectory, leaving Prechter’s followers with substantial losses.
Examining any long-term chart of major market indices reveals an undeniable upward trend. For instance, the S&P 500 has shown an average annual return of approximately 10% over the past century, accounting for inflation and dividend reinvestment. This consistent growth pattern renders the Permabear stance not just imprudent but potentially ruinous for long-term investors.
It’s crucial to understand what is bullish divergence in this context. A bullish divergence occurs when the price makes a lower low, but a technical indicator forms a higher low, often signalling a potential trend reversal. Permabears frequently overlook these signals, missing out on significant market rallies. A notable example is the period following the 2008 financial crisis, where numerous bullish divergences appeared in various technical indicators, presaging the strong bull market that followed.
The 100-year chart of the Dow Jones Industrial Average serves as incontrovertible evidence against the Permabear stance. Despite numerous economic downturns, world wars, and financial crises, the overall trajectory remains decisively upward. This chart demonstrates that markets have consistently recovered and surpassed previous highs, rewarding those who maintain a long-term optimistic outlook.
The solution is simple.
Focus on the simple factors, for that is what helps determine the trend; factors such as mass sentiment and extreme patterns (technical analysis) are on the charts. The news is not an essential factor; in fact, toilet paper has more relevance than news; at least it serves a noble function; one cannot say the same of news.
Anyone who advocates giving into fear should be thrown head first out of the front door(figuratively speaking, that is) and never allowed back into your house or mind. Fear never pays off; only the vendors of fear will make a handsome buck, and the buyers will lose their pants, shirts, and knickers, too.
Marc Faber is a classic example of A PermaBear that is full of rubbish
This dude has predicted prediction calling for the mother of all crashes since the inception of this bull (2009), but the only thing that has crashed so far are his predictions of a crash. He would probably make a very good science fiction writer, for he seems to spend a lot of time concocting scenarios that have a very low probability of coming to pass.
Here he states that we are going to experience a great recession in 2018
It turns out, once again, that the only recession was in his predictions, which, for now, are the only things that have been in a bear market. Hence, if you are a Permabear on his ability to predict market direction, it could actually pay off.
Then he goes on to state the party is going to end in 2018
Random Musings on Permabear Meaning
The concept of a permabear extends beyond mere pessimism; it represents a deeply ingrained psychological bias that can severely impair investment decisions. This mindset often leads to missed opportunities and financial underperformance. For instance, consider the case of Dr. Marc Faber, known as “Dr. Doom” for his consistently bearish outlook. Despite his reputation, Faber’s predictions have frequently been off the mark, particularly during the bull market that followed the 2008 financial crisis. His persistent bearishness caused many followers to miss out on significant gains in sectors like technology and healthcare.
Fear, the driving force behind the permabear meaning, is a potent but often misguided emotion in investing. Historical data shows that fear-driven market exits typically result in substantial opportunity costs. For example, investors who sold during the market panic of March 2020 missed out on the subsequent rally, where the S&P 500 gained over 100% in the following 18 months. This underscores the importance of maintaining a balanced perspective and not succumbing to fear-based decision-making.
Understanding what bullish divergence is can be a powerful tool in combating the permabear meaning. A bullish divergence occurs when the price makes lower lows, but technical indicators show higher lows, often signalling a potential trend reversal. For instance, during the 2018 market correction, several technical indicators displayed bullish divergences on the S&P 500 chart, preceding a strong rally in 2019. Recognizing such signals can help investors maintain a more balanced and opportunistic approach to market fluctuations.
Stress reduction in investing is not just about emotional well-being; it’s a crucial factor in making sound financial decisions. Research in behavioural finance has shown that stressed investors are more likely to make impulsive decisions and fall prey to cognitive biases. A study by the University of California, Irvine, found that chronic stress impairs decision-making abilities and risk assessment. To combat this, successful investors often employ strategies such as diversification, dollar-cost averaging, and maintaining a long-term perspective, which can help mitigate stress and improve overall investment outcomes.
Experts love to push the argument that investing is hard and that it takes forever to master this art. Remember that investing is an art, not a science and art is meant to be enjoyed. So are the masses starting to jump on the bandwagon after this strong turn around; the obvious answer would be yes. The not-so-obvious answer would be no. Continue reading. It turns out, at least in the first half of 2019, the not-so-obvious answer would be the right choice. The masses are still nervous, and until they start to dance on the streets, every strong correction should be viewed through a bullish lens.
Conclusion on Permabear Meaning
This bull market is unlike any other; before 2009, one could have relied on extensive technical studies to more or less call the top of a market, give or take a few months; after 2009, the game plan changed, and 99% of these traders/experts failed to factor this into the equation. Technical analysis as a standalone tool would not work as well as it did before 2009 and, in many cases, would lead to a faulty conclusion. Long story short, there are still too many people pessimistic (experts, your average Joes and everything in between) and until they start to embrace this market, most pullbacks ranging from mild to wild will falsely be mistaken for the big one.
The results speak for themselves; the majority of our holdings were in the red during the pullback, but now they are in the black, proving that one should buy when there is blood flowing in the streets. It is a catchy and easy phrase to spit out but very hard to implement because when push comes to shove, the masses will opt for being shoved.
Courtesy of Tactical Investor
Random views on Permabear
Another warning light is blinking on the dashboard of the US economy. This time it is the inflation-tied Consumer Price Index (CPI) which has the bears scurrying for their bomb shelters. David Rosenberg, a so-called perma-bear, was filling Twitter feeds with his unique brand of doom and gloom for the Dow Jones and wider US stock market.
GLUSKIN SHEFF ECONOMIST: CPI DATA PORTENDS RECESSION
David Rosenberg
Today’s CPI did miss targets against an expectation of a 0.2% increase relative to the 0.1% reading. The Dow Jones is easing gently off its highs today as well, having lost 53.29 points as of the time of writing.
In isolation, that’s a snoozefest, but Mr. Rosenberg did note something particularly interesting about the data as a predictor of recession. Apparently, he is using price pressure as a sort of alternative yield curve.
BOND-YIELD INVERSION: A STRONG INDICATOR OF RECESSION
Given that interest rates are always somewhat interconnected with inflation due to the Fed’s approach to monetary policy, this is not particularly ground-breaking. It is interesting, though, particularly with the bond market teetering on the brink of inversion. Full StoryA prominent Wall Street permabear says the stock market is ‘stoned on free money’ and it could ‘prove fatal’
One prominent strategist says the market is high literally and figuratively. Albert Edwards, global strategist at Société Générale, cautioned on Thursday that stock markets were becoming “stoned on free money,” leaving them “detached from reality.” It’s a condition that the strategist says could “prove fatal,” in the end.
U.S. equity benchmarks — and those across the globe — have roared back from a late-2018 selloff that culminated in one of the worst December returns in years, but Edwards says, in a Thursday note, that those gains have been largely aided by central banks that are willing to “inject another dose of euphoria into its market patch.”
Indeed, since a Dec. 24 low last year, the Dow Jones Industrial Average DJIA, -0.70% and the S&P 500 index SPX, -0.50% have both advanced by about 20%, while the Nasdaq Composite Index COMP, -0.22% has returned about 23%, thus far, as of trading midday Thursday, according to FactSet data.
Easing trade-war tensions between the U.S. and China have helped stocks rebound, but a policy pivot by the Federal Reserve in January arguably delivered the most substantial shift in investor sentiment over recent weeks.
The Fed, headed by Chairman Jerome Powell, said it would be more patient in assessing future rate moves, and minutes of the January gathering released on Wednesday indicated that its efforts to reduce a $4 trillion asset portfolio could conclude as early as the end of 2019. Full Story
Permabear Sentiment Index
Yesterday, I have created a download item that creates an index called the Roubini Sentiment Indicator. The same guys who created this indicator also created another one called the Permabear sentiment index. Permabear refers to people who are always pessimistic and negative about the future direction of the economy and markets. The Permabear sentiment index is built using aggregate keyword volume data from Google Trends. The index is the result of the sum of four Google Trends popularity indices; the keywords used to create these indices are: Roubini, Peter Schiff, Marc Faber and Nassim Taleb.
The item will login in your Google account, load Google trends and create a Google Trends popularity index for each permabear. It will then download the data, parse it, calculate the sum of each permabear volume data and then save the result in ticker symbol: ^GOOGLE_TRENDS_PERMABEAR. As with the Roubini Sentiment Indicator, you must set the email and password fields of this download item to your Google email and password (Select the item, click on Update, click on the “2 Field(s)” button).
The author of the Permabear Sentiment Index claims that the Permabear Sentiment Index can make 3.5% over a short period of 3 weeks compared to the 1.6% yield of the Roubini Sentiment Indicator over the same period. The author gives one reason behind the good performance of this index. Full Story
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