Saturday, January 3, 2009

Deja Vu - Bear Market Psychology

Just as Warren Buffet and Jeremy Grantham were "early" to exit the bull market in 1998 and 1996, respectively, the same is happening now with wise and prudent bear fund managers. News that Bill Fleckenstein has closed his short only fund does not strike me as the bottom for this bear. You will hear the same thing from the likes of marque short managers such as Jim Chanos, Doug Kass and Steven Leuthold. This is the natural arc of money management. Those that were prescient and captured the initial explosive returns are prudent to pull their powder in for the next move. To me it indicates that the final capitulation has yet to arrive. Irrational exuberance, now irrational armageddon is appoaching. The psychology of the market always remains the same, we just happen to be on the dark side this time. Food for thought.


Anonymous said...

Thanks for a great Blog.


Gemma Star said...

I know what you mean about being too early.

I got several friends to invest in techs in the late 90s. When I realized that no tree grows to the sky indefinitely -- and nothing seemed sustainable -- I got out AND TRIED LIKE A MAD DOG to get my friends to leave the party with me.

In the end, I left alone.

It's hard to figure these things out. I think I'm one of those people who expects another shoe to drop, which is why I appreciate your comments. I think -- hope! -- we're both right. (I hope this for only personal reasons: I'm positioned for a further drop.)

As Huck said: Thanks for a great blog! (Found you through Tim Knight.)