Bears Prepare for Fox Business News

Normally at "A Dash" we check sources carefully before publishing.  On this occasion, a document from a source we cannot reveal is so timely and interesting that we offer it for what it is worth.  Each reader must judge the significance and value.

The document purports to be a transcript of a secret meeting of Bearish market pundits, preparing for the launch of the new Fox Business Network on October 15th.  The participants include "Bear Leader," a widely-publicized market commentator, and a group of trainees–cubs, if you will.  One of the trainees thought he was signing up to be a turtle, not a cub, and he turned over his recording of the meeting.  Since the recording was made without the consent of other participants, it lacks any legal status.


Bear Leader:  We all know why we are here today.  TV wants a bear on every show.  Now it is not just Bloomberg and Bubblevision.  We also have to cover Fox.  Meanwhile, our ranks are thin.  It has been tough to be a bear.  Some team members have even cut back on appearances.  Your job is to change all that!  Now let me hear it!

Cubs:  Sub-slime!  Sub-slime!  Housing Led Recession!

Bear Leader:  That’s the spirit.  Now you have all read the Bear’s Guidebook, so this session should just be a review.  Let’s start with the economy.  When you get a GDP report that looks good, find something wrong!  Say that it will be revised.  Find something wrong with the timing.  If a quarter is lower than the past quarter, then the economy is "decelerating."  This is beautiful because it is a big word that sounds terrible even if the rate of growth is OK.  You can milk a bad quarter for months this way.

Cub:  What if the next quarter is better?

Bear Leader:  Easy.  That’s backward looking data.  We look forward to the next quarter!  The same with economic indicators.  What is the best indicator?

Cub:  Baltic Dry Freight?  Dr. Copper?

Bear Leader:  NO!!  Those are the old indicators.  Get the new playbook or you are off the team.  We are going with industrial production and housing starts.  Those are the only bad numbers recently, so use them.

Cub:  What about sentiment, ISM, and jobless claims?

Bear Leader:  These are all off their highs.  It does not matter if the numbers are OK,  just say it is off of the high of eight months ago or whatever.  The chartman will keep us all up to date.

Cub:  Chartman is great!

Bear Leader:  He sure is.  He can take any of 283 economic indicators and show that a collapse is coming.  Since they all move together, you just find one that looks bad, adjust the scales to the squiggle, chop off the part that doesn’t fit, and there you go!

Cub:  Those charts would scare anyone.  And he even calculates the correlation for the part you give us.  I’m not sure what that is, but it gives it that scientific pizazz.

Another Cub:  What did you say about jobless claims?

Bear Leader:  Let’s see.  You can either blame it on immigrant  labor — that was the first try — or  you can say that companies are not firing, they are just not hiring.

Cub:  Do we  know about hiring?

Bear Leader:  We don’t need to know.  Employment numbers are great.  We can blame everything on the government and their crazy birth/death model.  The "phantom jobs" line works great.  Everyone is quoting us.  And don’t forget unemployment.  The stupid bureaucrats have about ten different measures of unemployment, so one of them is sure to look bad.  I think we are using U6 now, but don’t let anyone compare it with past years.

But enough about employment.  What is the biggest topic right now?

Cubs (in unison):  The Fed.

Bear Leader:  Right.  And where is the Fed?

Cubs:  In a box!  In a box.  The Fed is in a box.

Bear Leader:  Good.  What do we say if the Fed leaves rates unchanged?

Cubs:  They know nothing!

Bear Leader:  And if the Fed cuts rates…..?

Cubs:  They are behind the curve.  It is too late.  Lower rates will not help housing.

Bear Leader:  And…..?

Cubs:  They are rekindling inflation.  Commodities are going up.  The dollar is going down.

Bear Leader:  Right.  Remember, commodities going up show inflation.  Commodities going down show economic weakness.  You are always right.

Cub:  That’s beautiful.  It is sort of like the yield curve.

Bear Leader:  By Jove, you’ve got it!  Just remember the yield curve.  Flat or inverted means that recession odds go above our standard 55%.  If the ten-year note goes up, that hurts the consumer and stock valuations.  If it goes back down, it shows economic weakness.

Cub:  What if some economist challenges us?

Bear Leader:  Don’t worry!  None of the shows check to make sure you know anything before going on.  It’s not like you had to take a test or something. 

Cub:  But what if someone quotes economists?

Bear Leader:  You just say that all economists are biased because they work for business or government.  (laughing)  Besides, everyone knows they can’t predict recessions.  That proves they wasted all that money on grad school!

Now one more thing — history!  Chartman’s database can come up with a historical comparison for any subject.  We were just working on the Panic of ’07.  Chartman had to go back even before Taft for that one!

History sells!  It makes us seem smart.  Even wise, since we know about these old times.  We can always find a disaster or two for any occasion.  Always start by saying, "This reminds me of…."

Cub:  What about earnings?  I heard some Bull say that earnings have been very strong.

Bear Leader:  Standard treatment.  Earnings must come down.  If they seem good, we say they beat reduced guidance.  Also, we show that the quality was poor.

Cub:  What does that mean?

Bear Leader:  It means we found something to criticize in the report.  We can always do that.   We can also find a few companies with problems.  That is plenty good for talking points.  Just say there must be more of them.  It’s called the cockroach theory.  You can also say that the companies and analysts are lying, just like they did in 2000.

Cub:  It seems like a lot to remember.

Bear Leader:  It gets easy with practice.  Remember, you are always looking forward and the other guy is looking backward.  That way you do not have to explain any real data.  Your predictions are as good as his — or better if he is an economist.

But don’t forget the Prime Law of Forecasting:  Never give a time frame.  Never!

Cubs (in unison):  Never give a time frame!

Bear Leader:  OK, let me hear it!


Bear Leader:  What about the consumer?

Cubs:  Spent-up, not pent-up!

Bear Leader:  What about the Fed?

Cubs: In a box!  Behind the curve!

Bear Leader: I think we are ready.  Now I want every cub to look to his left, and then to his right.  If we don’t talk this market down soon, one of your fellow bears will soon be gone.  I want to see those public recession polls up to 90%.


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  • Steve October 4, 2007  

    Freakin’ classic! I can’t think of a single “technique” that you didn’t cover.

  • Bryan October 4, 2007  

    Great stuff. Its amazing how well a certain amount of caricature helps to highlight the essence and technique of the bear’s position. I will know it when I see it from now on.
    It would be interesting if you could take a look at the bulls rhetoric too. Can we have that next please?
    I think that Murray Edelman whose book you recommend above would have enjoyed this post.

  • Mike C October 4, 2007  

    ROTFLMAO! Absolutely hilarious. With that said, it is easy to caricature or do a tongue-in-cheek piece for any position. You never know who might have the last laugh.
    There is a classic Motley Fool post from the “new paradigm” tech era of the late 90s which is a caricature of the typical value manager letter to shareholder. I’ll see if I can find it and link it here.
    The irony of ironies was the author clearly intended the piece to be a caricature of (and ridicule) the typical value manager who was buying the forsaken “old economy” stocks at that time and refusing to buy overvalued tech and it wasn’t too much longer the value managers were 100% correct.
    The “bear leader” might be right about economists:
    “One of the papers that didn’t make it into the Behavioural Investing book (but with hindsight perhaps should have been added in) was on the performance of economists in forecasting recession. In it I pointed that economists are simply hopeless when it comes to forecasting recessions (I could have stopped that sentance before the word recessions).
    Their track record is truly appalling. The chart below shows that in recent history (1980 onwards) the consensus of economists has not managed to forecast either of the recessions that have occurred. The data for this charts from the Philly Fed Survey of Professional Forecasters.
    In the past I have proposed that simple quant models often have the edge of human judgement (see Chapter 22 of Behavioural Investing). Some new research by the San Francisco Fed shows that my supposition that economists would be no different than many other fields in finding their subjective forecasts outperform by a simple model was correct.
    In a new paper Glen Rudebusch and John Williams show that a simple model based on the slope of the yield curve has significantly outperformed economists in forecasting recessions. They show that even if we use the economists own probability of recession estimate (rather than their spot forecast), the simple model wins hands down.”

  • Mike C October 4, 2007  

    Found it. This was written 1/24/00 which is 2 months before the bubble in tech and Internet stocks peaked, and we began a multi-year outperformance cycle for value managers.
    Pretty funny stuff.
    As a side note, I’ve noticed a definite pickup in the blogosphere for ridiculing and attacking the bearish/cautious perspective. I can’t help but wonder if from a contrarian perspective this is a sign of a potential top in the major market averages.
    On the bullish side from a contrarian perspective, the WSJ apparently had an article the era of Walmart is over. Perhaps a buy signal for WMT?

  • Bill aka NO DooDahs! October 4, 2007  

    Did you compile this list solely using the “search” feature at Barry’s blog?

  • RB October 4, 2007  

    Hilarious, but true. Funny thing is you could do the same story on the Kudlowian bulls. Oil prices going up? It doesn’t matter, inflation is under control because the core PCE says so. Oil prices going down, well, that’s a great time to buy stocks because inflation is falling with falling energy prices. House prices going up? It’s a strong economy and a great time to buy stocks. Inflation still uncomfortably high? Well, everybody and their mother knows that the government CPI calculation took into account that prices have been falling all over the country, inflation is well under control and it’s a great time to buy stocks.

  • Jeff Miller October 4, 2007  

    To RB and others noting that the same could be said for bulls —
    Sure. Someone should do it. Have some fun.
    I haven’t heard anyone cite a problem in finding bullish analysts for TV, however.
    Thanks for the comments:)

  • Mike October 4, 2007  

    As an advisor, I’ve been seeing much more bearishness than bullishness. When people are bullish, it’s often because the market only seems to go up, thus they feel they can trade and invest for themselves. (I’ve seen many, many brokerage statements, and most people are just this side of hopeless. It’s not really their fault. They’re told by many that they can can should do it themselves. From what I’ve seen, the Dalbar study is very accurate in its conclusion that the average investor nets less than 4%.) I tend to see one of two attitudes. (1) “I’ve tried it myself, did lousy, don’t follow the stocks I’ve picked or the markets, but I know I should invest, so I’d appreciate some help; or (2) “I invest in CDs.”
    I don’t see any investor bullishness about oil, gold, or emerging markets. The only bullishness I see is on t.v., and even there it’s pretty restrained, imo. They’re looking for the good rather than saying things are great.
    None of this is to say the bears don’t have good reasons to be bearish. From my perspective, though, the bears appear more emotional right now (not all, of course). I have multiple investors in almost all cash now because they’re so worried. I’ve read many posts on the net saying the same thing.
    Personally, I see a mixed bag. There’s good and bad. The one area I’m very curious about is the dollar. Boy oh boy are people bearish on the dollar. It’s practically universal. This trade is about as one-sided as it gets. I’m not betting big on the dollar just yet, but I am definitely very curious to see how it all unfolds. I really don’t see great strength in Europe’s future, so I don’t see any fundamental reason for continued stength in the Euro relative to the dollar. Just my two cents.

  • Bill aka NO DooDahs! October 4, 2007  

    Anybody who looks at CNBC and sees nothing but cheerleaders has a #%$%^ screw loose, and shouldn’t be driving, since their sense perception is soooooo poor. Listen, Erin “Maria 2.0 without the CEO” Burnett went from riding the bull to wearing a recession rat, when very few of us were talking about buying. That network is bipolar: things are VERY good or VERY bad, no in-between. Sensationalism sells, and that’s what they sell. Sensationalism. If you see only bulls on CNBC, you need to take a look at cleaning the $#^ off of your goggles.
    The web is full of bears. Any compilation of sites that includes traffic rankings (yes, I know traffic rankings are imperfect) will float the bears to the top of the list. Now, whether the internet consumer demand for bearish putridity, er, punditry, is indicative of the typical retail do-it-yourselfer is another matter, a question of fact that is probably beyond our power to answer. I believe the answer is “yes,” however. Check the tone of popular posts at the aggregators, like Seeking Alfalfa, et al, and you’ll see the same theme as you do at individual blogging sites.
    The really funny thing is that, even though the web is full of bears, they still have the huevos to call themselves “contrarian.” Look, if you’re one of the 2 or 3 dozen writers at the top of Alexa who is calling for an end to the bull market and 10-15 years of sideways action and/or an economic collapse, I’ve got news for you: your contrarianism has no “edge.”
    If I had a dollar for every time over the past 2.5 years that someone has told me a particular comment or post of mine was a contrarian sign of overbullishness and an impending market top, well, I’d be able to get another case or two of Mountain Dew on my next Wal Mart run. Gimme a dollar for this comment, and I’ll get some Trident to put in the Kia’s ashtray.

  • shrek October 4, 2007  

    Markets assume that the fed will ride to the rescue no matter what and as of now they are correct.

  • VennData October 4, 2007  

    Hilarious post. The tone captures the bull’s view of the bears as well as it captures the bears view!
    My thinking is that if the market moves higher or lower over time the bullish / bearish allocation adjusts a bit here and there, but by definition, the clearing price reflects the attitudes of the day.
    The real split, beyond the TV filter, the blogosphere etc. should be about 50/50. If it’s not, it will be.

  • Mike C October 5, 2007  

    Who cares what Erin Burnett thinks or says? She’s good looking and she’s paid to sit there and look good. She’s not paid for her superior insight into the market. She is a journalist, not an analyst, not a portfolio manager, not an investment strategist.
    Maybe I do have something on my goggles or my sense perception is off but aside from Peter Schiff, I can’t think of any other bearish analysts or strategists that appear regularly on CNBC. On the flip side, I’m pretty sure I could have a good night out on the town, if I could get a $1 from every CNBC guest who is bullish on stocks because they are “cheap” relative to bond yields. And no, I’m not interested in rehashing any debate on the Fed model.
    As much as some people like to go after Ritholtz I think is outlook is alot more nuanced. I would argue to characterize him as a permabear indicates one’s sense perception if off. He provides perspective/reasons to be both bullish and bearish on the market.
    As far as what is the contrarian position, I’m not sure the blogosphere is all that relevant. I think metrics like the asset allocation models of top investment banks, and cash positions at mutual funds are alot more relevant, and based on those bullishness is the consensus position, not the contrary one.