Permabears Anonymous

By Heisenberg

It is the most disliked bull market of my career. No one is excited. This is not like 1999 and 2000, where you went to a bar and CNBC was on TV.

That’s from John Fox, chief investment officer at Fenimore Asset Management, who spoke to the Wall Street Journal for what amounts to a celebratory piece documenting the summiting of Dow 25,000.

I’m never sure what to make of comments like that. As regular readers are acutely aware, I live and breathe this shit to a degree that is almost undoubtedly unhealthy. My “diet” consists entirely of sellside research, Bloomberg in all its various manifestations, geopolitical news, pasta, unseasoned New York strips (medium rare), Red Bull, and maybe a documentary when I can’t fall asleep. Up until late 2016, that diet also included a fifth of liquor everyday, but unfortunately, that’s no longer part of my daily regimen.

So when people like the above-mentioned John Fox and of course Donald Trump, contend that “no one” is excited about the stock market or that “no one” is talking about it, it doesn’t ring true. Tweets like this one seem patently absurd:

Even if record high stock prices weren’t plastered all over the news (which, contrary to the quote excerpted here at the outset, they are), there’s this thing called “the internet” that works pretty well when you want to check on the veracity of someone’s implicit or explicit claims. You know, it’s like how if you knew the man behind the Heisenberg pseudonym, you could easily determine if the claim that’s maybe or maybe not implicit in the choice of moniker has any basis in reality. “Type it in, Google’s your friend brah“:

Can’t say I don’t keep the level of intrigue up.

Anyway, the point is that I’m not sure I’m buying the whole “most hated” bull market meme. It seems to me like people are lovin’ it. Indeed, as Jeremy Grantham put it in his most recent letter to investors, “we’re seeing increasing vindictiveness to the bears for costing investors money.” And then there’s the ridiculous effort to characterize naysayers as literal goblins, an absurd depiction I lampooned mercilessly in “‘ThereIsNoTopism’ Is Wall Street’s Hottest New Religion“:

But it’s not just Trump. I read a post this week in which one of the most prominent pundits in the mainstream financial news media suggested that perennial bearishness from folks who have previously made good calls but who have been left behind by the current rally are akin to “heroin”-addicted “Gollums.”

Say what you will about the likes of Albert Edwards and Bob Janjuah, but I’m not sure it’s accurate to paint them with the Tolkien brush or otherwise suggest that they can’t be trusted because they are a gang of desperate goblins who think of media appearances like trips to the opium den.

All of that said, the Wall Street Journal piece mentioned here at the outset does contain some amusing anecdotes as well as some evidence to support the contention that retail investors are still feeling betrayed by the 2008 crash. To wit:

Nearly $1 trillion has been pulled from retail-investor mutual funds that target U.S. stocks since the start of 2012, according to EPFR Global, a fund-tracking firm. Over that same period through Wednesday, the S&P 500 soared 116% and, along with the Dow Industrials and Nasdaq Composite Index, rose to 190 all-time highs.


Needless to say, that’s more than a little misleading because as the Journal readily admits, “much of that nearly $1 trillion in mutual fund outflows likely made its way back into the stock market through lower cost exchange-traded funds.” In other words, what you see there is probably more about the epochal shift from active to passive than it is about an aversion to equities.

But to the extent retail investors have stayed away, here’s what they’ve missed:


And make no mistake, some folks have indeed missed out. Here’s the Journal again:

Survey data indicate that American stock ownership is retreating. Sixty-two percent of Americans reported owning equities, on average, between the fall of the dot-com bubble and the onset of the global financial crisis, between 2001 and 2008, according to a Gallup survey from early 2017. That number shrunk to 54% during the current bull market, from 2009 to 2017.

So who’s responsible for that? Well, for one thing, rising inequality in America seems to be exacerbating the situation as detailed extensively on Thursday in “Dear America: Here’s What Egregious Wealth And Income Inequality Looks Like.” Here’s a rather disconcerting chart from Deutsche:


Beyond that, one might be inclined to think it’s the “gollums” (i.e. the permabears) that have recently been maligned by CNBC personalities who are discouraging retail investors from getting involved.

Well ironically, the Wall Street Journal article says exactly the opposite. In fact, CNBC’s persistently bullish bias in the lead-up to the crisis ended up sowing distrust among folks like 33-year-old Shawn Goodspeed, seen here in his backyard:


“It was a good learning experience,” he told the Journal, describing how, “after taking advice from CNBC”, he invested what little he had in bank stocks in 2007 and 2008 – only to watch them crash.

Oh, the irony.

The real punchline, though, comes at the end of the piece. One more time, from the Journal:

College students and other millennials, meanwhile, have found other ways to speculate than buying the latest tech stock. Nate Reutiman, a 20-year-old Boston College student studying marketing and analytics, said he is more interested in cryptocurrencies. Last year, Mr. Reutiman and his roommates discussed contributing $1,000 each to install a mining rig, a system of computers built to find bitcoins, in their dormitory room.

That’s right, millennials have decided that it’s far “safer” to just mine Bitcoin than to leave their fate in the hands of the cruel market gods.

I suppose, given the above, there’s an argument to be made that the ubiquitous “money on the sidelines” excuse for predicting a final, glorious “melt-up” does indeed have some merit.

Maybe once we get to S&P 3,700 (as Jeremy Grantham says we very well might), everyone can stop claiming that this is “the most hated bull market in history.”

(In)conveniently, that will likely be the moment when it all falls apart, causing the Shawn Goodspeeds of the world to once again lose faith in the shrieking puppet punditry.

In the end, our advice would be to stay “diversified”.  If there’s anything we’ve learned over the years, it’s that you never know when you’re going to need a fallback plan…

Y’all think Uber’s the future;

Our cars been autonomous.

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