Wall Street’s bear hunt

People who missed the recent bear hunt in New Jersey may soon be able to cross over into New York and have another go. Many argue that before the current bull market in equities sputters, the media (and investors) will have to turn around and hunt down its formerly favorite Wall Street bears.

The crux of the argument: rallies don’t end until bears give up. Here is Forbes columnist Ken Fisher’s way of putting it:

“I’m waiting for most of the big-name investors who were pound-the-table bearish as 2003 began to either capitulate or be publicly ridiculed. That hasn’t happened yet.”

I’m generally sympathetic to Fisher’s view. Some prominent investors, strategists, and commentators have become weirdly comfortable as bears, to the point that it’s hard to imagine what would make them optimistic again, short of market price-earnings multiples falling to historical lows. But what they forget is that market participants know that people who sold in the past at historical lows now look like fools, so it’s unlikely — short of nuclear attack — that we will reach those levels so neatly again. Only once bears figure that out and finally become bullish will we know that there is no-one left to buy in the current rally.

One caveat: Fisher himself is something of a perma-bull. He called the end of the 2000-2002 bear market too early at least twice, and must have lost investors money doing so. So while he can be forgiven, at least a little, for his schadenfreude given the troubles of market skeptics who stayed skittish too long, he doth gloat a little too much given his own record.

Nevertheless, here is Fisher’s pantheon of bears for whom hunting licenses (metaphorically speaking) will soon be granted:

  • Richard Bernstein — Merill Lynch

  • Robert Shiller — Yale University
  • Jeremy Grantham — Grantham, Mayo, Van Otterloo
  • Bill Gross — Pimco
  • Richard Pell — Julius Baer Investment Management
  • Douglas Cliggott — Brummer & Partners
  • Stephen Roach — Morgan Stanley
  • Robert Prechter, Richard Russell and Martin Weiss — newsletter writers
  • James Grant and Gary Shilling — Forbes columnists

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