How to Be Wrong and Think You’re Right

Albert Edwards  is famous in the financial world for being negative, to put it mildly, on anything and everything related to the future prospects of the world. By his own admission, he’s been bearish for 23 years.

Edwards recently shared the following chart which he claims vindicates his bearish take on global stocks even as they rose 300% (U.S. stocks did 450% over this time). He feels like he’s been wrong and still right because as you can see, bonds basically kept pace with stocks and experienced much less volatility and shallower drawdowns.

I couldn’t quite recreate his chart. Long-term U.S. corporate and government bonds each kept pace with global stocks, but global bonds did not keep pace at all. Whatever, I guess this is sort of besides the point.

In this same letter, Edwards said, “My consistent über-bullishness on western government bond markets never seems to attract as much attention as my extreme bearishness on equities.”

The thing is, he hasn’t been consistently bullish on bonds. Unless the following is from a different Albert Edwards. In August 2011 he told Reuters “Be sure to lock in a low-rate mortgage while you can, though…a period of hyper inflation will push bond yields into double digits and send the S&P 500 stock index tumbling to 400, only a third of its current value…On a 10-year view I think government bonds are a horrible investment…My view is that the end game for all this is monetization and trade war and very rapid inflation.”

Maybe it’s just me but this does not sound like somebody who has been consistently über-bullish on western government bonds.

I don’t dismiss bearish arguments out of hand and I am not a perma-bull, but this “I’m not wrong because hey look over there” just reeks of bullshit.

Why do people continue to want to hear from somebody who has been bearish since the Yahoo IPO? As Morgan Housel said in the seduction of pessimism, “Tell someone that everything will be great and they’re likely to either shrug you off or offer a skeptical eye. Tell someone they’re in danger and you have their undivided attention.”



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