Why We Need Perma-Bears

Whenever the stock market looks shaky, the

Whenever the stock market looks shaky, the “perma-bears” come out of hiding. These are the permanently, professionally skeptical investors or market strategists who can always be relied upon for a gloomy take on the stock market and the economy. The obvious problem with these perma-bears? They’re way too consistent. Like a stopped clock, they’re inevitably right some of the time. But, because most of the time stocks move higher, they’re mostly wrong. I recently interviewed retired Merrill Lynch analyst Stephen McClellan and wrote an article on his new book, “Full of Bull: Do What Wall Street Does, Not What it Says, To Make Money in the Market.” The book describes many of Wall Street’s biases and blind spots, which put individual investors at a disadvantage. One of Wall Street’s big conflicts of interest, McClellan says: It has a huge incentive to be optimistic. Investment houses only makes money when people invest, so Wall Street tries hard not to scare off paying customers with doom and gloom. He has a point, and that makes me more grateful for the few perma-bears that are around. Maybe we need more of them.

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