Why Luc Will Never Be A Market Star
By Michael Lewis
Berkeley, California, Oct. 29 (Bloomberg) -- One of the striking things about the financial press during a bear market is what isn't in it: bona fide financial celebrities.
A bull market gives rise to lots of big-time bull gurus (Abby Joseph Cohen, Mary Meeker, Henry Blodget) who then become almost household names. There is no real equivalent to these characters in bear markets.
There are bearish authorities, of course, and they get a bit of attention, but they excite nothing like the passion and interest of the bulls. Just the reverse: they excite skepticism.
Even now, when Abby Joseph Cohen of Goldman Sachs Group Inc. predicts to newspaper reporters that the stock market will rise 40 percent in a year, no one writes that she stands to make a lot of money if the market rises. When David Tice of the Prudent Bear Fund tells reporters the stock market will fall 40 percent next year, he is invariably described as a man who bets money on the market falling.
Double Standard
One obvious reason for this double standard is that the average investor is long the market. Faith, or optimism, or whatever you want to call it, is built into our financial system. Skepticism, or pessimism, or whatever you want to call it, is systematically discouraged.
The people who are right about the market when stocks are rising receive a lot more uncritical flattery and attention than the people who are right about the market when stocks are falling. As a result, for anyone who sets out on a career of financial punditry, there is a very clear incentive to become a bull.
Louis Rukeyser, for instance. The host of ``Louis Rukeyser's Wall Street'' has made a fantastically good living for going on 30 years by ridiculing bearishness in all its forms, and celebrating bullishness in most of its forms.
Even in this darkest of stock market moments, Rukeyser has defied, with Dracula-like determination, public television's attempts to kill him off. As the Dow plunges, he continues to be watched and taken seriously, if not on Wall Street then at least in West Palm Beach.
Bears' Obscurity
No doubt Rukeyser would argue that he has been watched because he's been right about long-run trends: the market is higher now than it was 30 years ago. And that is no doubt a part of the secret of his success. The other part is that the television audience is long.
But here is the point: Even with the Dow falling fast, it is impossible to imagine a bearish version of Louis Rukeyser's gaudy worldly success. Just as we grossly exaggerate the importance of people who argue that that the market is going up, even when those people are dimwits, we grossly diminish the importance of those who say the stock market is going down -- even when those people are first-rate thinkers.
James Grant, for instance. The editor of Grant's Interest Rate Observer is one of the most interesting market analysts alive. Even in a bull market his views are far more stimulating and original than those of most bullish pundits.
For going on 15 years he has argued, with wit and clarity, that the U.S. stock market is a house of cards. If there was any justice in the world right now, James Grant would be a household name, feted for his prescience, offered huge sums for his public speeches, perhaps even recognized on occasion by New York taxi drivers.
But because James Grant is instinctively bearish and constitutionally incapable of optimism, he has, even now, only a small, perverse cult following.
It's Your Fault
Whose fault is this? Why do we have this weird, and weirdly corrupting, asymmetry in the market for financial opinion? It's hardly the bears' fault. In their gloomy way, they try just as hard as the bulls to attract attention to themselves.
It's no easier to blame the bulls. They are far too busy enjoying their worldly success to conspire against the bears; indeed, in their treatment of the bears the bulls exhibit a certain largeness of spirit about them. (Rukeyser invites Grant onto his TV show, for example.)
The media might take the blame, but the media is usually just frantically trying to give its audience what it wants. Which is to say that the fault must lie with the audience. If our financial punditry is structurally bullish -- if it is inclined to encourage markets to rise a bit too giddily -- that is only because consumers of it want it to be.
They think they want the truth, but the truth about what they want isn't as simple as that. On the one hand they'd like the truth; on the other, they have these stock portfolios. They have, in other words, a conflict of interest.
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