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Perma bulls and perma bears are two divided groups of investors with extremely opposing views regarding financial markets.
Each one is so entrenched in their beliefs that they even identify themselves as being part of a gang. That’s right, bull gang and bear gang members are running rampant across social media. These “gang members” almost entirely novice retail investors.
But it’s not a joke for some people. There really is a lot of perma bulls and perma bears out there that stubbornly refuse to see both sides.
It’s comical that investors can be so close-minded and certain about a highly unpredictable stock market.
Let’s go over bulls and bears in the financial markets and what the perma argument is all about.
Why Are Bulls and Bears Used to Describe Markets?
With all the animals on planet earth, why are bulls and bears a part of the financial world? Why is any animal? Is Wall Street more of a zoo than a world-renowned market of high finance? Maybe, but that is a whole other discussion.
There isn’t any documentation of the exact origins of bull and bear expressions used in the financial world. The general consensus is that these animals are used because of how they attack. Bulls thrust their horns upward, and bears violently swipe their paws downward.
A charging bull with an upward attack is a good representation of stocks running higher and higher. In contrast, bears can do immense damage in a single swipe, just like a stock market crash.
What Is a Perma Bull?
A bull market means stocks are doing well and breaking all-time highs. The term bullish is used to describe someone that believes prices will continue upward. A perma bull is someone who is “permanently” bullish.
A perma bull thinks stocks will go higher no matter what. They do not believe in any idea of long-lasting downward movements in stocks. Every single dip is a buying opportunity.
What Is a Perma Bear?
A perma bear is basically someone with the exact opposite belief of a perma bull. They have a long-term bearish outlook on stocks. At any time, a rug-pull will happen that will decimate decades of stock market gains.
No dip is worth buying unless it is a devasting crash that’s wiped out all the bulls. Some perma bears will never touch stocks. However, most seem to just really want to buy low.
Dissecting the Perma Mentality
Anyone that has been investing for a while knows that price trends change, especially in the short term. So why would anyone develop such an extreme directional bias?
There are a few reasons why someone may become a perma bull or a perma bear.
Perma bulls usually:
- Have made most or all of their money on the bull side.
- Trust the Federal Reserve and financial system.
- Don’t want to accept that a long-term bear market is possible.
- Love to passively invest. “Just buy stocks and watch them go up. It’s easy!”
- Tend to disregard fundamentals.
- Overly optimistic.
Perma bears usually:
- Are firmly against the Fed and believe the asset bubble they’ve created will come crashing down.
- Believe the financial system is doomed.
- Either prefer gold or now bitcoin instead of stocks.
- Do extensive fundamental and technical research to advocate their bearish thesis.
- Have made money shorting the market but lost money going long.
- Overly pessimistic.
Why You Shouldn’t Be one
The markets are unpredictable, and the world is constantly changing. To be a successful trader or investor, you need to keep an open mind. Anticipate both bearish and bullish movements to maximize profits and minimize losses.
You could argue being a perma bull isn’t such a bad thing. Historically, bulls are making the most money because bear markets are usually short-lived.
The issue with being overly bullish is the same as being overly bearish. You miss things that can cause poor investment decisions. Perma bulls often over concentrate and can get wrecked from going all in.
Even long-term buyers should not be overly bullish. Although markets have always gone up over time, it’s taken Japanese investors from the 1980s 30 years just to break even.
Who is to say that will never happen in the US? Being a perma anything is completely irrational.
There are multiple ways to make money in the financial markets. You should be able to dissect views from various sources and make your own non-biased decision.
Investors that typically perform the worst are those that fail to adapt and control their emotions. Continually fighting a trend because you want to be right or going all-in during times of euphoria will leave you penniless.
The one thing that perma bulls and perma bears have in common is that they let their emotions get the best of them.