What really motivates perma bears | stockbee

7/04/2007

What really motivates perma bears

Brett Steenbarger explains what motivates the perma bear.

The doom sayer needs followers who feel endangered and vulnerable. The forecasts of doom make the prophet needed to get through the pending calamity. No one needs a savior if the forecast is for sunny times ahead. By undercutting the sense of security of others, the doom sayer carves out a niche for himself: I will get you through the market panic, the economic collapse, etc. The same dynamic is at work with the seemingly solicitous and chivalrous man who wants his woman dependent upon him.


This is exactly the kind of psychology at play at number of site. The perma bear cult guru and the followers need each other to rationalize and amplify their message. This is also one of the reason why perma bears who are wrong on market directions for many years do not re-examine their bearish bias objectively. It is much easier to externalize the problem by claiming data is manipulated or others do not understand how dangerous the economic conditions are really. The motivations in such cases is not to make money but to attract and keep growing bearish followers which helps the cult leaders derive meaning in their life and get psychological satisfaction.

At a larger contrarian level, do you think market will have a longer term top while bearish bloggers are the most popular blogger. Think about it, tops are marked by bullish sites being most popular. That was the case when market topped in 2000. Currently we have exactly reverse situation. There might be corrections but till the bearish bloggers get dethroned in terms of readership and popularity, we are unlikely to see a longer term top.

5 comments:

Bill said...

This explains what motivates the demagogues (Barry, B. Cara, et al), but doesn't explain what motivates the rank and file bears on the discussion boards.

Is the ego boost from the idea of "Calling a top?" After all, one only needs to call a good top once every 20 years or so to have that repeated every time you're on TV (Doom Gloom Boom).

Bill said...

No thoughts on what motivates the rank and file message-board bears?

christmasfern said...

I was for a short time a follower of the perma bear cult but in my defense it was in my very early days of learning about the market (back in 2001-2003). At some point in 2003 i started to realize it was all bullshit and thus began the journey of figuring out how to actually make money.

I think maybe what attracts people is that its an easy way to make yourself feel superior to other participants but theres a problem ofcourse. Its like the perma bears are addicted to crack, you feel good but in reality you are a loser. What possibly drove me into this camp temporarily were 2 things: First when i became interested in the market it was in the midst of a bear market, the doomsayer narrative was easier to swallow in this environment. Two and this is most important, the market is confusing and complicated. My desire was to develope an understanding of how the market worked and the doomsayer narrative provided a convenient prepackaged way to feel like you KNOW something. The fact that its out of the mainstream only reinforces that you are indeed right and know more.

Much more difficult would be to actually understand the market for real in a way that can make you money. If you are actually a successful trader you may have a similar feeling of superiority to other market participants, but in that case it could be understandable. Most participants cant achieve true success so they are left with some bad options and one of those is the seductive cult of the bear. Travel too far down that path and it seems you are lost forever.

Bill said...

Bear market? It was a bull market, if you were in REITs, Homeys, Insurance Companies, etc.

Pradeep Bonde said...

Much of what christmasfern said explains the psychology. Besides that you have to understand :
1 99 % of population is follower. So if you just shows up as leader, people follow you. Followers by definition lack the critical self examination skills. So it is often easy to establish yourself as one eyed kind in a kingdom of blind
2 It is extremely difficult for cult followers to break away from cults, because of the psychological benefit of following a cult is too great.
3 Many of the followers genuinely believe in the messiah effect.
4 Bad events act as anchoring event paralyzing peoples ability to take risk. The market crash in 2000-2002 was such event. Negative doomsday scenario gurus do well post such events. Many people will never be able to trade or invest successfully for entire generation due to the psychological trauma caused by the bear market. Such people find comfort in such gurus.
5 By now the gurus know that they are wrong but accepting it in public will lead to disintegration of the cult and followers would abandon them, so the mutually beneficial relationship continues.