Bears are misreading the bulls.
It's not that stocks bulls are looking for a V-shaped recovery. It's that they have nowhere else to put their money.
A thread:
It's not that stocks bulls are looking for a V-shaped recovery. It's that they have nowhere else to put their money.
A thread:
I spent most of the weekend conversing with those long/bullish or overweight stocks, trying to understand what it is they see that I don't.
And I was really surprised.
It turned into a really long thread, and I'll summarize it here.
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And I was really surprised.
It turned into a really long thread, and I'll summarize it here.
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Along with most bears, I was under the impression that bulls are expecting a V-shaped recovery fueled by a quick return to normal as markets reopen, workers are rehired, and companies are kept afloat by stimulus and government support. But that’s a straw man.
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Most expected economic pain going forward. Yet they say they’re buying stocks because there is no alternative -- TINA for short.
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It was best summarized in this tweet:
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The point is, yields are low, making bonds unattractive. Commercial property can’t be expected to soar in a recession. Faith in commodities have been shaken by oil trading negative. And gold’s near record highs. The only market offering tempting returns is equities.
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Now, obviously, bears are a heterogenous bunch.
Not all of them looked at this through the same prism.
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Not all of them looked at this through the same prism.
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For others, it was more about the technicals, with markets having turned excessively bearish in March.
Best summarized, perhaps by everyone's favourite pencil-and-paper chartist, @hmeisler
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Best summarized, perhaps by everyone's favourite pencil-and-paper chartist, @hmeisler
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And then, some said that they think the lockdown and work-from-home culture means that more day-traders are active in the market.
This was a minority view.
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This was a minority view.
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Perhaps the most seductive bullish view, was expressed by a bear.
While global economies will contract, smaller firms will be hit hardest. The multinationals that make up the bulk of the S&P 500 and Nasdaq will thrive.
While global economies will contract, smaller firms will be hit hardest. The multinationals that make up the bulk of the S&P 500 and Nasdaq will thrive.
And then, I spoke to a bull who blew my mind.
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Bears are not in fact, bearish. They only want to see markets fall so they can get a lower entry point at which to buy stocks. Every time the market dips, a few of those bears cave, and buy. And that’s what’s keeping the rally going.
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So, in summary, bulls aren’t in fact bullish on the economy, but buy stocks because everything else is rubbish. And bears aren’t in fact bearish, but are looking for an entry point, because they’re long-term bullish.
The end.
The end.
