Here’s the definition courtesy of the Oxford Dictionary®:
Cease to resist an opponent or an unwelcome demand; surrender: The patriots had to capitulate to the enemy forces.
When one joins the other side after waging a war or conflict against it. They don’t call you a “capitulator.” They use a term far more harsh.
Why I’m making this statement crystal clear is to emphasize what I’m noting and reading once again throughout the financial media. Where investors of once held high regard for either being contrarian or short side investors (aka Bears) are throwing in the towel sighting they can not compete (as in making profits for their members) and in so doing they are now giving rise to the notion, “If you can’t beat’em – join’em!”
The reasoning’s for why they are taking this new-found stance not only has me shaking my head. It has me waving a finger at the same time. What I seem to be hearing or reading is more CYA (cover your arse) than anything else remotely insightful.
The latest example of this is none other than Hugh Hendry’s latest letter on throwing in the towel. Now before I launch let me express, I have had a great respect for Mr. Hendry over the years. I have watched many an interview, read many a letter, listened closely to many of his analysis on markets, their causalities, and have seen him as an unabashed “willing to call bull-crap – bull-crap” force. No matter whom was trying to spread it before him.
I did then – as well as still do, hold his financial insights and acumen in very high regard. However, it was his latest letter to investors and its tone in which I took particular issue with. (You can read if in full here) And here’s why…
If one is to take at face value the tenure and tone of the letter. One can’t help wondering where was this thinking 3 months, six months, a year or more ago? And that is the crux of my whole contention that we are not talking capitulation, rather something entirely different.
Here’s is a statement attributed to Mr. Hendry that I just can’t seem to get my hands around: “Crashing is the least of my concerns. I can deal with that, but I cannot risk my reputation because we are in this virtuous loop where the market is trending.”
I can see that coming from any of the so-called “smart crowd” paraded across the financial media landscape. But, coming from him I was a little taken back. For the situations or analysis he seemed to be outlining doesn’t get realized in an, “A-ha!” type moment from my viewpoint. They were either there and rebuked based on other criteria or – it’s only allowed itself to be spun into some believable – sell-able – hypothesis. I could be totally wrong, or off base. However, that’s the feeling I had as I was reading.
It’s one thing to look at something, think it means one thing or another based on correlations, causation, or other factors only to find what once was – is now not. But, (and it’s a very big but) can you take the correlations, or causation factors that moved markets in the past and transpose those by overlaying them into today’s models where none of the previous influences apply other than name only?
i.e., Is the 7% unemployment figure reported today a true qualitative figure to use and compare as to what 7% unemployment (UE) was 20 years ago? (If you said yes, I have a bridge I would like you to consider investing in.)
Although the UE example above is my own. I couldn’t help looking at all the correlations or calls for causation without viewing them through that prism. And this is not something isolated to Mr. Hendry. This seems to be the underlying principle or vehicle used by many of these last “capitulating” bears. Followed by many with the most over used CYA statement of the year: “We all know this will end badly.”
Personally I am a firm believer in stating you’re wrong. (I’ve stated that case here) However, being wrong for the right reasons is something the professional needs to not only take into their own counsel, they have to deliver that reasoning to others as well. Even if credibility as well as money may be on the line. Anything less and it has all the trappings for giving birth to questioning all the underlying reasoning both past, as well as future.
If investment advisers and others came out and made statements along the lines of:
Listen, I/we’ve been wrong in our timing. Yet, as far as our thinking, it has not changed. But – we seem to be leaving money on the table. What we would like to express now or advise is that we are in perilous, uncharted waters. Anyone who tells you what is going to happen from here with any certainty is embarking in a fools notion. Protecting assets, and the fear of a crash is still a paramount concern. However, for those who want to put any money at risk as to try to capture any remaining momentum. Here’s an idea. And it’s nothing more than that, for we are in uncharted waters. So: Caveat emptor!
I personally can read, understand, and quite possibly invest is such an idea. For the reasoning behind it is understandable. Yet, this is what true capitulation is, is it not?
Stating that we’re now going higher because of momentum based on technical or fundamentals used to gauge previous moves (i.e.,1+1=2 can now mean 1+1= ____what ever you want) is a tad flawed in my thinking.
Again, this is what seems to be the over arching theme from many I still highly regard. (Just because I disagree on this point doesn’t mean I’m right or they’re wrong. Only time will tell.)
There have been many (including myself) who have seen or expected more catastrophe or economic challenges to occur such as Jim Rogers, Harry Dent, Robert Prechter, Jim Chanos, and others. Yet, the call has yet to materialize. However, what I have not seen is capitulation as to say: “Hey, we’ve been wrong so it’s probably more blue sky from here!” No, what they have seemed to capitulate on was that their call on the timing has been off. Nothing more.
Agree or disagree but the reasoning behind the “why” they believe, what they believe, and the analysis behind it, is still as sound as it was when presented. More than not it has shown to give one even more reason as to apply even more caution the longer or further we travel this path.
I mean truly: If I stated famed investor Jim Rogers said something to the effect that he was selling all his gold positions because he feels gold is in a seemingly unstoppable bear market. Where momentum is only to the downside. And, there was nothing else to do other than “capitulate” and sell. Followed with charts, and technicals for selling your gold portfolios based on today’s analysis, as well as today’s fundamental overlays.
Would I have your attention?
Or would you be asking for you money back?
© 2013 Mark St.Cyr