Why Do Bears Always Have the Best Arguments?

by: Paul Kedrosky

Even though the stock market has rightly been called the triumph of the optimists, with bulls stomping bears over and over for one hundred years, stock market bears not only haven't gone away, but they generally have the most compelling arguments. Their points seem so damn plausible, level-headed, empirical, and reasonable, while bulls come across as starry-eyed idealists.

Let's consider some reasons why that might be:

  1. Things fail more often than they succeed. Pace availability heuristics, it is easier to think of examples of things failing than succeeding, so it gives bears more fodder.
  2. Bears have the past, and bulls have the future. Bears get to argue from data, while bulls argue from what might happen.
  3. Apocalypse is seductive. There is something about the thought of imminent mass ruin that really gets people's attention, as has happened with the overdone coverage (hello, Matt Drudge!) of the current credit problems in the market.
  4. There is a Puritanical urge in America wherein people want to believe they (or better yet, their neighbors) will be punished for their prior success, etc., so it stands to reason that stocks will punish people after they make them a lot of money.
  5. Bears have been generally wrong for so long that they have to know how to tell better stories.

Feel free to add more. You too, Barry.

[Update] A few people (in email etc.) are missing the point, in part. Essentially I'm arguing that bears have influence disproportionate to their accuracy, and I want to noodle why that might be.