Bears sound smart, but bulls make you money: Ed Yardeni quotes Wall St adage to defend optimism

Edward Yardeni wrote that he would like his tombstone to say, "Ed Yardeni, 1950-2050. He was usually bullish and usually right!".

Permabears may get an investor out of the market "well before a significant top" but they are not likely to get the investor back in at the bottom, wrote the noted investment strategist Edward 'Ed' Yardeni in his latest post.

"Bears sound smart, but bulls make you money," he wrote, quoting a Wall Street adage and addressing criticism levelled at him in a recent article, which called him permabull that had his projections undermined by economic realities.

The criticism came from November 19 post titled, "Yardeni And The Long History of Stock Market Prediction Problems" by Lance Roberts, the Chief Investment Strategist for RIA Advisors.

Also read: 'Something doesn't make sense', says Yardeni Research on US stock market

"Usually bullish, usually right"

Yardeni wrote that he is indeed a permabull and he treats the label as a compliment, and then added that he would even want his tombstone to record his bullishness. He wrote that he would like his tombstone to say, "Ed Yardeni, 1950-2050. He was usually bullish and usually right!".

He cited the reasons for his optimism, such as the past half-century bringing only six bear markets, recessions being infrequent and not lasting long and bear markets keeping the secular bull markets healthy for nearly a century.

Yardeni wrote, "According to Seeking Alpha, there have been 28 bear markets in the S&P 500 since 1928, with an average decline of 35.6%. The average length of time was 289 days, or roughly 9.5 months. ABC News reported that since World War II, bear markets on average have taken 13 months to go from peak to trough and 27 months for the stock price index to recoup lost ground. The S&P 500 index has fallen an average of 33% during bear markets over that time frame.

"Yet the stock market has been in a secular bull market since the Great Crash of the early 1930s".

He added, "Bear markets serve an important function for bull markets, helping to flush irrational exuberance out of valuations and allow price indexes to resume their climbs on a sounder footing."

Defending trackrecord

Against the criticism that his projections are proven wrong by economic realities, Yardeni mounted a spirited defence and wrote that Roberts was "uninformed" about the accuracy of Yardeni's forecasting track record.

Roberts had written, "First, historical precedents remind us that unforeseen economic downturns can reverse market momentum even during seemingly unstoppable growth. As noted, Yardeni made bullish forecasts previously, only for economic realities to undermine those projections."

To rebut this, Yardeni several instances where his predictions were "optimistic and right". These included his experience of the eighties, when he was bearish during the bear market.

Yardeni wrote, "I turned very bullish in August 1982, which was the bottom. I didn’t call the August top of the 1987 bear market, but I did call the bottom in December of that year." Yardeni also said that he was the first strategists to identify the bullish consequences of the High-Tech Revolution in the early 1990s and recommended overweighting the technology sector in the S&9500; and that, in May 1990, he predicted Dow 5000 in 1993 and that happened behind schedule in 1995 and Dow at 10,000 by 2000 and it happened ahead of schedule on March 29, 1999.