Market Overview

Doing Battle with Perma-Bear David Rosenberg


Decoding Toolbox

• Perma-Bear-adjective- A stock market forecaster, guru, or money manager that always sees the world as half empty and invests/makes predictions accordingly.

• Perma-Bull-adjective- A cheerful stock market forecaster, guru, or money manager that always sees the world through brighter glasses, and invests/makes predictions accordingly.

By the way, in classic Wall Street abbreviation form, “perma” is short for permanent. The Wall Street forest is chock full of perma-bulls and perma-bears. If stocks are circling the drain (trader talk for “going down”), the perma-bull will view it as a “great opportunity to buy stocks at a cheaper price” because “earnings growth is solid.” The perma-bulls likely have clients owning a bunch of stock, and don’t want to appear on television saying anything other than to “buy.” What perma-bulls usually neglect to appreciate are the drivers that are sending stocks lower in value, how long these drivers will weigh on investor sentiment, and the messages the weighing mechanism that is the stock market is sending so loud and clear.

• Quick and dirty fact on perma-bulls: They are usually fans of holding stocks for some undetermined “long-term” timeframe.

As for perma-bears, well, they are the complete opposite of perma-bulls, with a couple of key characteristics. First, perma-bears are a sensitive bunch, rarely cracking smiles on television interviews for to do so would be to acknowledge a ray of sunshine in life. They can’t have that! Second, is that perma-bears will often be equipped with a heavy arsenal of historical facts and figures that supports their views and shoots down the claims of the perma-bulls. Wall Street is an optimistic group by nature, so the perma-bears have to coming packing heat.

The persona of the perma-bear is captured perfectly by the headline grabbing economist David Rosenberg. This middle-aged, highly intellectual fella makes the financial news television rounds and speaking circuits like a champ, firing off a litany of facts and figures that fit his perma-bear persona. We bet that if asked whether he is in fact a ferocious perma-bear this statement would be mouthed: “I am a realist, and the numbers are my guide.” Put on your rock-climbing shoes and grab a Columbia Sportswear backpack, ‘cause today we are decoding a perma-bear.

David Rosenberg’s Six Hurdles for the Market: Condensed
(all of these imply “bear, bear, bear”)


“First, there is liquidity, this major catalyst for equities since last October looks set to subside with the Fed seemingly backing off from a QE expansion, at least over the near term. And the ECB is back talking about inflation so it doesn’t even look like a rate cut is coming despite escalating recession pressures in Europe. It is now also highly doubtful that China will re-open the monetary taps following the disappointing March inflation data.”

Us wearing a perma-bull costume:

1. The Federal Reserve has promised to keep interest rates low until sometime in 2014. Businesses will be able to invest on the cheap, and consumers could borrow reasonably. Stock prices should technically rise.
2. Low interest rates are not the problem in Europe, it’s that peripheral countries have too much debt that will need to be wound down into the future.
3. China had a hot inflation report this week, but home values are falling rapidly. Also, new loan volume is at its highest since January 2011. China will lower rates to reignite its economy.


“Second, the reality is that 70% of the economic releases in the past month have come in below expectations. While the chain stores did report what seemed on the surface to be a solid +3.9% year over year sales gain in March, keep in mind that yet again we had very mild weather and we also had an early Easter effect.”

Us wearing a perma-bull costume:

• Fair points. But, the stock market has lost steam in response to the reports, so stocks are a better value than they were in March.


“Third, there is the rapid slowing in corporate earnings. In Q4, we had the year over year trend in S&P 500 operating earnings slip into single-digits (+9.2%) for the first time in two years, and absent Apple, the pace would have been 6.2%. Only 62% of companies beat their estimates, which is far below average. As for Q1, the consensus is all the way down to +3.2% on a year over year basis, well off the +5.5% expectation at the turn of the year and the +12.8% forecast in the mid-part of 2011.”

Us wearing a perma-bull costume:

• Mr. Perma-Bear, have you missed the countless number of companies this week to issue very positive comments on first quarter financial trends? Your data seems so past tense.

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