Two Ideas That Must Die

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There are plenty of banal phrases that get tossed around in the financial media that are cringe-worthy. ZeroHedge recently did a little write-up about the whole “cash on the sidelines” nonsense which is worth a read. But I’ve got a couple of more obscure phrases which tick me off.

One of them comes up here on Slope fairly regularly, and it is along the lines of “The bears dropped the ball today.” There are many variations of this phrase, but the basic notion is that the bears had an opportunity to really drive the market down, but they weren’t up to the task, so they failed.


There are many reasons such a sentiment is wrong-headed, but the two big ones are:

  1. It implies there is equal balance between bulls and bears, and they are battling it out somehow. There are probably 99 bulls for every bear out there. So it’s really more up to the bulls selling than it is up to the bears shorting to drive the market lower.
  2. The bears are actually in a passive, not active, role. Once in position, they need to wait for the market to fall. They don’t need to do anything to make this happen. It’ll either happen or it won’t. No amount of aggressive shorting on the part of bears out there is going to put a dent in the market.

The other one, far better-known by the public, is the idea that near the end of a quarter (and especially near the end of a year), portfolio managers engage in “window dressing”, and it thus makes sense to run around and buy up stocks that have been doing well to enjoy the big goosing prices will enjoy on the last day of the quarter.

This simply defies logic. If you’re a portfolio manager, and you’ve had a lame-ass quarter, running around on December 31st and gobbling up large quantities of PCLN, TWTR, AAPL, or anything else that is running hot, isn’t going to redeem you to your clients. “Wow, this quarter was pretty weak……….but at least the fund is long Priceline.” Just. Plain. Dumb.


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