A Permabear Strikes Back

At the end of July, I wrote an article, “Jeremy Grantham Knows Nothing,” providing an update on the high-profile bear whose crash call I’ve followed all year.

His initial forecast was for the stock market to collapse in spring. When that failed to materialize he changed the schedule to this fall, warning that the trigger “could be a virus problem, it could be an inflation problem, or it could be the most important category of all, which is everything else that is unexpected.”

To make fun of his rescheduling, I revisited his forecast and pointed out the folly of forecasting in general, and the superiority of my Signal System, which requires no forecasting. Of his above “forecast,” I wrote:

“In other words, Grantham doesn’t know what or when. He has a general idea that the market has been going up and will one day go down, but did you need a big kahuna to tell you that?”

He also said, “Bubbles are unbelievably easy to see; it’s knowing when the bust will come that is trickier.”

Following which, I wrote: “Full stop. That knowing when the bust will come is everything. If it can’t be known, then the seeing of a bubble was merely conjecture and ultimately irrelevant. Does anybody mind a bubble that doesn’t go bust? In Years Two and Three of such a bubble, would anybody be happy to have gone to the sidelines in Year One because Grantham had no trouble seeing the bubble? Of course not.”

This installment is not about Grantham but about the resurfacing of an old nemesis of mine, RJM Consulting, in response to my Grantham article. The head of this firm, who once worked at a major credit rating agency, has predicted the spectacular implosion of my Signal plans for the past seven years. He went ballistic when I upped the ante from my “over committed” 3Sig plan to my leveraged 6Sig plan then—Katy bar the door—my 3x leveraged 9Sig plan. It would be the death of me, he promised.

About my Grantham piece, he wrote:


“Does anybody mind a bubble that doesn’t go bust?” Well, yes.

This is the foundation of MMT: for so long as the Fed has air in its lungs, that bubble will keep growing.
The problem is timing, as it ever was. Dollar losing its reserve currency status, increased wealth inequality that reaches a destabilization point, climate change finally reaching the halls of the rating agencies forcing a drastic reset.

The market has been in “postponement” mode for a long time. Making hay while the sun shines is sensible, but that “1/3 of the time” it’s in retreat often happens at a speed for which your reallocation methods will not be sufficiently timely.

Do you not think that a 20% or 30% mark down of the 65-year-old subscriber’s portfolio is a risk worth avoiding? Buying again after the “correction” may do very little for the retiree who is depending on that portfolio’s value, should it be collateralizing some borrowing (that may become a heavier burden as a result).

And that’s only assuming a correction. Looking at the debt levels across the globe, and the negative real rates of interest, suggests a deflation (and an asset reset) of much greater magnitude, at least as a possible risk.

Even without leverage, the market is (to my mind), primarily a casino.



I normally let this kind of thing blow over, having seen it dozens of times with always the same arguments that somehow never matter, i.e. the Fed will run out of ammunition, there’s too much debt, the dollar will lose its reserve currency status, and so on. All permabears cite the same repeating set of ten or so worries, none of which have altered the market’s long-term upward march.

But somehow they never mentioned a pandemic.

This time, I couldn’t hold back. The following was my reply to RJM Consulting:


Ah, RJM. Still stuck on the sidelines, I see. That might be impressive if you had gone there at recent price peaks, but you and I both know you’ve spent most of the past 13 years there. Subprime was your PTSD.

All right. I’ll respond to you the way I always do when you send me a reprise of the doubt you voiced today. I will do it not for your benefit, because I believe you to be permanently lost to headlines and invalidated pundits, but for the benefit of other investors who visit my site to find a better, more profitable and less stressful approach to stock-market profits.

Here goes:

How do you know the market is in postponement mode? Permabears have said so for years, while investors committed to a system of price reaction have profited greatly.

The Fed was supposedly out of ammunition after dot com and again after subprime, yet here we are, much higher in price with a Fed looking and sounding confident. Who’s to say they don’t have five or ten more rounds of stimulus in them?

The dollar is nowhere close to losing its reserve currency status–another decades-old permabear canard. The SDR basket of currencies never caught on, and nobody can name a single sovereign currency ready to take over. There is no alternative to the dollar, therefore the dollar will not lose its status in the near term.

National debt and global debt–other permabear favorites that have not mattered yet in the 35+ years we’ve heard they would create a catastrophe.

You are told these things matter, and you believe they should matter, but so far they have not mattered. “But just you wait,” you might think, and have written to me in so many words. Fine, except that investors have awaited accurate permabear forecasts for decades. An investing lifetime comprises only about three decades, so thanks to permabear warnings, some investors have missed out on a lifetime of stock profit.

As for a retiree’s use of my system, they enter a reduced allocation as they approach and then enter retirement. A bear market would cause a drawdown in their stock allocation, but deep into retirement their base allocation to stocks is only 20%. They would have plenty of buying power to pounce on the low prices and benefit from the ensuing recovery–and a system that guides them to do so, which is more useful than pundits advising them to hide because of, oh, I don’t know: the market being in postponement, the Fed being out of bullets, the dollar losing its reserve currency status, and national debt, perhaps?

From the above, you might conclude that I’m bullish, but this is wrong.

I don’t see the market in the traditional bull/bear terms, and think that the framework does a disservice to investors. The stock market merely fluctuates, and my system is indifferent as to where we are in the fluctuation. It reacts to all price movement, both up and down, and is currently prepared to take advantage of a price decline. We’ve hoped that the likes of Grantham could get it right one of these months, but the months, quarters, and years go by. We make money; permabears don’t.

How many times over the years have you written something like your latest comment to me? Why do you not notice that my system keeps working while the pundits who speak to you are usually wrong? I know you hope to tell me you told me so one of these years, but even then it won’t mean anything because my system will be busy buying whatever coincidental price decline you believe vindicates your lifelong skepticism.



Strident, yes, but it felt good.

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One Comment

  1. Elton Fok
    Posted September 13, 2021 at 11:17 am | Permalink

    I signed up your weekly letter and received your email this weekend. However, I have not registered for an subscriber and am unable to access your letter.

    Please let me know how to solve this problem. I would read your sample weekly letter before making a decision for purchase.


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