The Perma-Bears Will Never Be Convinced

reminiscences of a stock operator pdf

The Perma-Bears Will Never Be Convinced

HT Reader Scott for finding this…

This is proof of what I have been saying for a while now. No matter how positive the news, no matter how many years have passed since we were going to into a”double dip” that never came, no matter how many thousands of points to Dow has risen, no matter how many millions more people are working and on and on and on…..no matter any of it…..people will find it all to somehow be bad.

Scott called this perfectly, it is “creative bearishness”

Now people going back to work at an increasing rate is bad…..

From Business Week

Ian Shepherdson is a nice guy. He’s also an economist, which means that he looks at the world a bit … differently. Right now, he’s concerned that the U.S. unemployment rate might continue to fall faster than the Federal Reserve is projecting.

Shepherdson thinks Fed Chairman Ben Bernanke and Vice Chairman Janet Yellen are too dovish—that is, they’re underestimating the strength of job growth. He fears the Fed’s rate-setting committee will keep interest rates too low for too long, causing inflation to jump. The Fed has said it anticipates keeping rates “exceptionally low” through the end of 2014. I wrote about the Fed’s take on this on April 5.

Shepherdson may not be right about this, but a lot of people feel the same way, so it’s worth considering the argument. He operates from a London base as chief U.S. economist for High Frequency Economics in Valhalla, N.Y. His claim: While job creation is great, it’s not healthy for unemployment to be falling so rapidly when the economy is expanding at such a modest pace. It means productivity growth is low. It was just 0.9 percent annualized in the last quarter of 2011. Crucially, Shepherdson thinks it will stay low.

His theory: Productivity was high in the early phase of the recovery because large, capital-intensive companies were able to meet rising demand, without hiring, by working their machines harder. But now the expansion has spread to companies that are less capital-intensive and have to hire as soon as demand for their goods and services picks up. Shepherdson fears that if the Fed’s low rates stimulate strong growth in output, companies will quickly run out of people to hire and the competition for labor will drive up wages, leading to inflation. He described his views in his weekly notes on April 16 and elaborated on them in a phone interview.

Bernanke and Yellen have a different explanation. They say companies overshot their job-cutting—perhaps out of fear that things would get even worse—and since then, they’ve corrected that mistake by staffing back up. That’s consistent with a fair amount of research, including some by economists at Citigroup (C).

Either theory, the Fed’s or Shepherdson’s, seems capable of explaining what has happened so far. But they have starkly different implications for what happens next. Shepherdson fears the labor market will overheat unless the Fed starts nudging up interest rates. The Fed’s central forecast is that unemployment will still range from 6.7 percent to 7.6 percent at the end of 2014, meaning that labor-market tightness is the last thing for anyone to worry about.

Being a “bear” is cool. Just look around. Bears are the economic equivalent of hipsters. Everything is a joke, everything is to be mocked and anyone who thinks the opposite of them is just clearly a moron. Despite everything that has happened since the depths of ’08-’09, people are still overwhelmingly pessimistic. Pick any 10 randoms headlines from any financial publication. If 8 of them aren’t negative, I’d be shocked.

Somehow being optimistic has dwarfed into not seeing reality or thinking there is no way anything can go wrong. Neither is the case. So as this market continues to climb, it is doing so “in spite” of the sentiment out there, not because of it. It is grudgingly accepting the economic realities of the US.

Whenever people going back to work can be twisted into a negative in a major publication…….people are just still stuck in the recession mentally

By  valueplays

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About the Author

valueplays
Todd Sullivan is a Massachusetts-based value investor and a General Partner in Rand Strategic Partners. He looks for investments he believes are selling for a discount to their intrinsic value given their current situation and future prospects. He holds them until that value is realized or the fundamentals change in a way that no longer support his thesis. His blog features his various ideas and commentary and he updates readers on their progress in a timely fashion. His commentary has been seen in the online versions of the Wall St. Journal, New York Times, CNN Money, Business Week, Crain’s NY, Kiplingers and other publications. He has also appeared on Fox Business News & Fox News and is a RealMoney.com contributor. His commentary on Starbucks during 2008 was recently quoted by its Founder Howard Schultz in his recent book “Onward”. In 2011 he was asked to present an investment idea at Bill Ackman’s “Harbor Investment Conference”.

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