On Friday morning, Bloomberg’s Jonathan Ferro delivered a highly amusing indictment of “permabears” live, on television.
In essence (and I’m paraphrasing), Ferro said those who persist in dour narratives about equities seem to enjoy a “free option” that never expires. Once every decade, there’s a calamity and we call them geniuses. “I’m not talking about you,” he assured Tom Keene.
I’m not generally fond of the term “permabear.” It’s a cliché, and as such, doesn’t play well with eloquent discourse. Moreover, I doubt there are many “real McCoy” (to channel Jeremy Grantham) permabears running around out there. As someone called Randy (he’s managing director of derivatives at Charles Schwab) told Bloomberg’s Vildana Hajric this week, “It’s difficult to be a bear in any market and, frankly, if you’re a bear, you’re probably not going to last very long.”
That’s true. Randy inadvertently laid bare a rather pernicious lie which, when exposed, goes a long way towards explaining the “free option” afforded to Ferro’s permabears.
Almost instinctually, we use the term “cult following” to describe the fanbases associated with various personalities, newsletter writers and web portals who traffic in dour narratives for a living. But what is a “cult following”? For the first time in the half-decade history of this site, I’m going to quote Wikipedia:
Cult followings are… commonly associated with niche markets. Cult media are often associated with underground culture, and are considered too eccentric or subversive to be appreciated by the general public.
So, by that definition, I have a “cult following.” Rocky Horror Picture Show has a “cult following.” (Incidentally, I once had a girlfriend with the “Boss” heart and dagger tattoo on her shoulder.)
By contrast, the fanbases associated with some the more well-known “permabears” are huge. A few of the more popular bearish web portals and many of the widely-followed purveyors of snide market commentary and transparently cynical economic “analysis,” are bonafide celebrities. Not in the George Clooney sense, of course. But if you boast hundreds of thousands of social media followers, generate millions of clicks per week, have managed to make your name synonymous with “bear” and/or your brand is immediately recognizable to at least ~20% of the investing public, you don’t have a “cult following.” You’re a star. You’re mainstream. Which is supremely ironic considering how many such people like to pretend they’re somehow “edgy” or “contrarian.”
Bearish antics (and “antics” is more apt than “analysis”) aren’t a “niche.” The only thing that sells better than fear is controversy, and you can engineer plenty of the latter around yourself (or your brand) if you spread enough of the former.
The problem with this is that millions of market participants don’t understand Randy’s simple axiom: If the term “permabear” means what we typically say it means, it’s not generally possible to be one and remain solvent.
That’s self-evident, but too many people forget it every, single weekday. If someone (or some web portal) has spent the last dozen years predicting a monumental, irreversible collapse, they’re not putting their money where their mouths are. If they are, they’re losing it (their money) perpetually and making up for those losses by monetizing the same dour predictions which never pan out. And to the psychological and financial detriment of the masses.
Everyone claims to know this. Occasionally, when I make this point, I’ll get a stray email suggesting it’s quixotic — that no “real” traders take “those guys” seriously. But, superficially at least, that’s incongruous with the size of their fanbases.
Not only that, some of the very same “real” traders, PMs, journalists and hedge fund managers who supposedly “know better,” read and publicly share the very same content they swear to know is poisonous. That’s one reason (among several) I stopped communicating with the vast majority of folks who fall into one of the aforementioned categories. If you tell me, in private, that you understand Windex is for cleaning mirrors, but then I catch you recommending it to your friends as a good alternative to blue Gatorade, I’m left to conclude that you may be a hopeless moron. (And, no, putting a “RTs are not endorsements” disclaimer in your Twitter profile doesn’t absolve you of complicity if you retweet a picture of a Windex bottle with a caption that says “sports drink!”)
Of course, you could argue that most people who consume that type of content or revel in those types of narratives (the content and narratives produced and espoused by Ferro’s permabears) are just there for the entertainment. It’s a “guilty pleasure,” so to speak.
But I don’t buy that. Not entirely, anyway.
It’s not that I think large numbers of people consciously make decisions about capital allocation based on the musings of disreputable carnival barkers or tabloid-esque web portals. It’s that the cumulative effect of propaganda designed solely to be monetized in “fear sells” fashion can, over time, alter the way people behave. When that content is infused with poison (political agitprop, for example), it can be highly corrosive.
Unfortunately, the last five years taught us that the general public would rather persist in angry delusions than they would engage with reality. That likely means the bull market in fear and propaganda will persist, quite possibly in parallel with the bull market in financial assets which propagandists swear is going to come crashing down tomorrow. And, as Ferro noted, there’s no expiry for “tomorrow” when it comes to financial agitprop.
[As a fun addendum which some of you will doubtlessly appreciate and enjoy, one of the other reasons I culled some of my more well-known acquaintances is that past a certain point, the disconnect between someone who tells you how wonderful they find your musings and the complete absence of a public endorsement becomes too glaring to politely ignore. If you’re someone with tens or, especially, hundreds of thousands of acolytes, don’t tell me I’m an unparalleled observer of markets, economics and life in general, if you don’t intend to spread my gospel. If you want to flatter me, save the DMs and introduce me to your followers with a retweet instead. They’ll thank you for it.]
I think that most thoughtful permabears are wired to overweight the bearish factors and underweight the bullish factors. They are often very smart and very informed, they just can’t get the balancing and/or time frames right.
So I like to read their stuff, to see what they have to say about the bearish factors, and balance out the traditionally bullish stuff from the street. Even when they are repeating the same bearish factors for years, they sometimes have interesting data points.
I would distinguish between thoughtful permabears and the outright charlatan variety who are usually hawking a uranium fund or something.
Folks like Albert Edwards, David Rosenberg, Fred Hickey, John Hussman are, in my personal view, in the “thoughtful” category.
Thoughtful doesn’t mean “right”. Some thoughtful permabears – the ones I just listed, maybe? – have been wrong for longer than some market participants have been able to buy beer. Following their predictions would have wiped out you out. But considering their thoughts as part of your investment process is, I think, useful.
LOL. Well, my 74 Twitter followers, of whom I can attest with certainty that upwards of 2 are not bots, have heard about you a couple of times, for whatever it’s worth.
I’d suggest, by the way, that anyone who reads you but doesn’t at least occasionally feel compelled to pass your insights along is simply not in the same business as you are, despite appearances. That could also explain the discrepancy in follower counts. Just hazarding a guess here, but, you haven’t sold your soul, have you.
Not selling your soul is a tricky business, it can cost almost as much as selling it does.
I don’t mean “regular” people. For about a year, I had a Twitter DM box full of “blue checks” (i.e., verified accounts) and other folks with tons of followers, and there’s only so long before you think “Wow, why will none of these people publicly profess their admiration for my writing?” I mean, it can’t be that they actually don’t like it, because about half of them I didn’t even know previously — obviously, you wouldn’t just contact somebody you didn’t know and tell them their writing is great if you didn’t actually like it. Why would anybody do that? That would be a total waste of time. So I can only conclude that dozens of widely-followed people really like my stuff, but it never occurs to them to spread the “good” word. That’s fine (people have better things to do, after all), but at the same time, I have better things to do than chat with them. Things like write great content so they can enjoy it. 🙂
Ah, yeah, I understood. I just felt like I had to let you know concretely that you’re appreciated in that way at least by the rank and file readership, not least because I happened to both tweet and share posts of yours with friends by email within just the last couple of days.
Personally, I find people on Twitter vexing, and it’s probably a function of the platform. I’ve started to think no good can come of it… It’s not a meritocracy as far as ideas are concerned. It really seems like everybody with any following at all on there is first and foremost just executing a marketing strategy. Getting any engagement from a highly-followed account seems to be a function of how well you serve their hype needs. Call me cynical, I guess.
I think it’s a problem specific to Twitter, I’ve found that other big social media platforms do have their uses. But every time I come back to Twitter in particular, I eventually wind up walking away feeling again like the signal-to-noise ratio is too low to bother with.
“Why would anyone do that?”
I can think of three reasons-
“They” want to incorporate some of The Heisenberg Report’s thoughts and ideas as their own.
If “They” provide their existing followers a connection to The Heisenberg Report, then their followers might realize how much better The Heisenberg Report is and switch to The Heisenberg Report.
Insecurity.
Caveat- I don’t have Twitter, Facebook, Instagram, etc., however, there are a few smart people on Twitter that I enjoy reading what they write.
I like/appreciate/use the writing here because it forces me to think which means going to places that are unfamiliar and challenging (and not so easy to find these days). Social media can quickly become an echo chamber.
I am all over the map with what I read each day. Economics is about half my reading. No News.
jyl, I agree with you and who.
I only have three absolutely must read authors a day. Heisenberg about three or four or more times a day. Barry Ritzholt and Mark Chandler
I do no social media. This is the only place where I actually write comments besides letters and emails.
The Heisenberg Report is a place where I find two things I truly enjoy.
Information and humor.
Oh wait three things, good Graphic Art.
Despite being on opposite ends of the political spectrum, I am such a fan of H, particularly his writing style. He has such a gift when it comes to communicating. So count me as a huge fan. On the permabear subject–the problem is endemic when you have long decade or so long rallies puctuated by crashes. It also depends on are you one to be partial to the “voting machine” aka momentum or the “weighing machine” aka valuation. If the latter, you are likely sitting short and wondering why you are such an idiot.