After months of good-faith efforts to bolster investors’ spirits, several prominent financial journalists threw in the towel this week and turned gloomy. The pundits, at least, are capitulating. Could this mean we’re closer to a market bottom?
Example 1 — Ben Stein
Back in the summer of 2007, after the first wave of the credit crisis hit, New York Times columnist Ben Stein told us the market sell-offs were “nutty,” since “This economy is extremely strong. Profits are superb. The world economy is exploding with growth.”
Over ensuing months, while acknowledging the steady stream of poor economic news, Mr. Stein continued to maintain an upbeat attitude, encouraging investors not to panic and telling them “this big, strong economy will sail on through.” That changed this week. Mr. Stein asks, “What if a slowdown is a never-ending story?” His column raises the specter of a depression, telling us, “This time it’s different . . . The problem now, as in 1929 to 1940, is that the economy is not functioning normally.”
Example 2 — Jason Zweig
Wall Street Journal columnist Jason Zweig has done a valliant job these past several months urging investors to avoid panic and to see the silver lining that has emerged with cheaper stock prices and higher expected returns.
But this week, he, too, turned to the Great Depression in his Wall Street Journal column, “1931 and 2008: Will Market History Repeat Itself?” In the gloomiest terms I’ve ever read from him, Mr. Zweig warned us:
It is vital to realize that markets are never under some obligation to stop falling merely because they have already fallen by an ungodly amount. It also is vital to explore how bad the worst-case scenario can get and to think about how you would respond if it comes to pass.
Example 3 — Floyd Norris
The chief financial correspondent for the New York Times, Mr. Norris has done a great job reporting on the credit crisis and, unlike many shyer souls, has been willing to stand up and be counted with his predictions for where a market bottom will likely be found. Not this week. As Mr. Norris put it in his blog, “P.S. I am following the suggestion of several commentators on this blog. I am giving up on trying to identify a market bottom.”
Market bottoms typically require a “capitulation” where the vast majority of investors finally sell most of their assets and walk away in disgust. By many measures, we’re not there yet (and may not be for months). But pundits capitulating is at least a good start.
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