NOBODY loves a party-pooper. When asset prices are going up, most people are inclined to celebrate. The bears who argue that asset prices are about to fall tend to get dismissed as out of touch (dotcom sceptics supposedly “just didn’t get it”) or are likened to stopped clocks: occasionally right, but mostly wrong. If they dare to make money out of their beliefs by selling short (betting on falling prices) when a crisis hits, bears are decried as economic vandals and politicians call for their activities to be banned. ...Don't buy gold. The dividend yield is too low.
The most excitable bears are not so much polar as bipolar. They dabble in conspiracy theories and talk of the collapse of civilisation and the need for investors to sell all paper assets, buy gold and retreat to Idaho. But bulls can be overenthusiastic too, talking of new eras in which asset prices will reach undreamed-of heights (remember the book “Dow 36,000”?). Over the past 20 years it has been the repeated interventions of central banks to rescue bulls, not bears, that have contributed to the current mess by encouraging too much risk-taking. ...
But the world needs to nourish its bears. They were right about most things in the past ten years: dotcoms and American houses were indeed overvalued, and rapid credit growth did make America’s financial system and the global economy vulnerable. ... This decade, investors have lost more money listening to the bulls than to the bears.
Friday, October 02, 2009
The Economist says, "Feed the bears":