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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: SouthFloridaGuy who wrote (74813)12/19/2006 9:42:35 PM
From: CalculatedRisk  Read Replies (2) of 110194
 
I meant to point out this is a classic sucker bet. Based on historical returns, the bet would be the S&P500 up 32% vs. down 10%.

You offered 20%, so based on historical returns, the odds would be heavily in your favor. Or you could offer up 40% vs. down 20%. The odds are about the same based on history.

History shows being bearish is tough, and usually wrong. For investors, being wrong is being wrong - it doesn't matter if you are bearish or bullish. OTOH, Wall Street is always bullish - first it is usually correct, and second, there is almost no penalty for being wrong if you're bullish - but the penalty is heavy if you are wrong and are bearish (say goodbye to your job).

So for Wall Street, being bearish is actually worse than being wrong!

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