Kass: The Perma-Bear Cult

Doug Kass

05/27/09 - 12:03 PM EDT

This blog post originally appeared on RealMoney Silver on May 27 at 7:25 a.m. EDT.

"An optimist is a person who sees a green light everywhere, while a pessimist sees only the red stoplight.... The truly wise person is colorblind."

-- Dr. Albert Schweitzer

I have often written that both perma-bears and perma-bulls are attention-getters, not money-makers.

The perma-bear cult, of which I have often been accused of being a member, is an especially strange clique that often sees the clandestine plunge protection teams saving the U.S. stock market at critical points. They have never met a government statistic they like but instead see the U.S. government as "massaging" and revising employment, inflation and many other economic statistics in order to paint a positive picture. They express contempt for second derivative economic improvement and never or rarely ever see prosperity. They view seeds of recovery as Superman saw Kryptonite and extrapolate economic/stock market weakness to the extreme.

And they never ever or rarely make money.

Ironically, the perma-bear crowd is typically uninhabited by money managers. For example, the largest and highest profile short seller, Kynikos' Jim Chanos, is not a perma-bear. Jim systematically searches for broken or breaking business models, and he understands market and company-specific risk/reward. Nor was my friend/buddy/pal David Rocker a perma-bear. He, too (before he retired from Rocker Partners), identified adverse secular changes facing companies and, similar to Jim Chanos, had an uncanny ability to unearth frauds like Baldwin United, Enron and Lernout and Hauspie (among many others).

Rather than managing money, the perma-bear crowd is typically inhabited by writers of market letters, investment strategists and economists turned strategists, all of whom have little or no skin in the game. They also make a lot of speeches during downturns for a helluva lot of money and often write editorials in the Financial Times, New York Times and Wall Street Journal.

By contrast, the job of a money manager is not to be dogmatic. And to paraphrase Jim Cramer, neither is it to make friends; it is to make money.

The perma-bear species is a fickle breed, especially in its ardor for purging from its ranks anyone who breaks the faith. Woe betide a former perma-bear deemed less bearish!

In summary, perma-bears, similar to their first cousin perma-bulls, rarely make money and, in the main, shouldn't be listened to most of the time as even when they call a downturn, they almost always overstay their positions.

And they may be harmful to your financial health.