[quote=sdrealtor]A couple weeks ago I saw an analyst on CNBC that really resonated with me. He was talking about the pyschology of bears vs bulls and the cases they bring. He pointed out that the bears bring rational facts based upon what is actually going on right now. On the otherhand the bulls case is irrational and based upon a better tomorrow regardless of what the facts are today. BY definition the bulls hypothesis requires a change for the better in the future.
His point is that at face value the bears will always have what seems to be the stronger argument. In every case the bears will be more rational, more fact based and better substantiated. In spite of that, they obviously arent always right because things change and things can get better.
I had never looked at it that way before and it really struck as something often overlooked but so obvious.[/quote]
I actually don’t agree with this at all. It might seem like the bears always have the better argument because for so long, markets defied gravity. But now that gravity has come back into play it’s clear to me that a lot of bears are just as prone to confirmation bias as the permabulls we always mocked.
SD housing was unbelievably overpriced compared to rents. In that case, in my opinion the burden of proof fell on the bulls and as we all know, they never came through because there was no good explanation except that it was a bubble. The bears could just sit back and languidly swat away the bulls’ lame arguments with their bear paws.
Now, SD housing is reasonably priced in comparison to rents (in many areas anyway). It’s a different situation. But to my surprise, it seems like more people are “certain” that there will be another huge crash than there were at the top. This makes no sense. Given the amount that prices have fallen, the burden of proof is now upon people who think that housing will make another big crash leg down.
There is some evidence to that effect, most notably shadow inventory and the potential for a huge rate rise. But the latter (while i think it’s very probable) is super hard to predict in terms of timing. And the former, as this and a million other threads shows, is really tough to get a handle on as far as what’s happening.
Meanwhile, the government has declard all out war on the housing crash and is creating insane amounts of money and credit to pump directly into the market.
So there are arguments in either direction. And the burden of proof now falls on both camps.
Getting back to my original point, I see a lot of confirmation bias and invalid arguments coming from a lot of bears. Not all — some bears have maintained analytical rigor, but imho a lot have not. IOW, I’m seeing as many bad arguments coming from the bearish camp as I am seeing from the bullish camp — although I am also seeing great arguments coming from certain members of both camps.
So, I do not agree that the bears get a pass for always being more right in terms of analysis and evidence, because that is simply not the case.
Nor do I believe that the bulls should get to cling to some fairy tale that it’s correct to ignore evidence because it sometimes worked in the past (which is how I read that CNBC commenter’s remarks, and is a sentiment I firmly disagree with — it’s better to figure out WHY markets defied gravity when they did, not just assume that’s a permanent state of affairs.)
A really good analyst will be able to make the turn from bear to bull and back again when it makes sense to do so (and will also know when to be neither). Of course, everyone is wrong at times, but a good analyst will at least TRY to make that turn, rather than simply being a permanent bear or bull.
