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Relative Bears


If the mainstream view is that being cautious equals being a be it.


After reading Toddo's buzz suggesting once again that the 'Ville is getting a "bear rep," I went digging for numbers to see whether the "cautious" bend of our community is justified or not. An odd statistic can always be found to justify one's position, so, to avoid that trap, I went to the most basic of all stats: the performance numbers for the SPX, the Naz and the broader NYA index. Here's the scoop:

1/1/1996 to 10/31/2005:

  • SPX (Total Return Avg, Avg. Annual): +129.5%, 8.8%
  • Nasdaq: +109.5%, 7.8%
  • NYA: +180%, 9.9%

1/1/2000 to 11/25/2005:

  • SPX: (5.3%), (0.9%)
  • Nasdaq: (42.9%), (9.0%)
  • NYA: +12.6%, 2.0%

7/1/97 to 6/30/2002:

  • SPX: +15.5%, 2.9%
  • Nasdaq: +1.3%, 0.2%
  • NYA: +11.6%, 2.2%

The true long term holders would have done OK over the last 10 years. With the turmoil that most market participants were subjected to, how many at the beginning of 1996 would have chosen such a ride for 6.5%-8.5% annual after-tax returns?

Those who jumped on the Minx at the beginning of 2000, today would find themselves somewhere between even (but with an ulcer) and buried.

And those who straddled the Hoofy's and Boo's parties are probably asking themselves, what the *@!* happened. I do not have the stats for those who went long in 1995 and got off the train in 2000 because chances are they are way too rich to be reading this.

What's my point? The same one I made in this piece. Whichever way you slice it, the market does not hand out easy money; if it does, it usually makes sure to take a good chunk of it back. The difference between enjoy-the-roller coaster and getting-sick-on-it is, IMHO, the degree of risk one is exposed to when the trade is put on. Right now, I and many of the other contributors, view the oft mentioned structural risks piled up higher than at any other time in recent memory, including the 2000 top.

What pervades the 'Ville's message is not that we are going to crash or that the sun will explode tomorrow. Merely that the risks for a MAJOR accident are high. If the mainstream view is that being cautious = being a bear, so be it. But that by itself may say more about the how deeply in denial investors are about the concept of risk than any other statistic Boo can throw about.

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No positions in stocks mentioned.
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