Being a doom-and-gloom Bear stops being fun when the Bear Bar gets crowded. When everyone has moved to our side of the boat, the grizzled Bears get nervous, especially when they peer over at the Bull side of the boat and see a handful of dispirited Bulls ignoring the guy yelling at the bartender to "back up the truck."
The problem old-timers see is what everyone knows no longer matters. Markets do a cliff-dive not when all the bad news has been beaten into everyone's heads for months on end but when the bad news has yet to percolate through the euphoria.
Bull markets start when the Bullish news dwindles to signal-noise and buyers have given up or are going short to finally score some gains from the market decline.
In other words, it's what few know that matters, not what everybody knows. When everybody knows all the good news, that news no longer matters. When everybody knows all the bad news, that news no longer matters.
After a couple quarters, all the news has been priced into the market. What hasn't yet been priced in is what few discern or know (and are keeping it confidential so they can build a position without alerting others).
At the top, everybody discounts what could go wrong because those betting on bad things finally manifesting have lost money. At the bottom, everybody discounts what could go right because nothing's gone right for months and all the bearish dynamics are still in full swing.
Contrarians are slippery critters because they never really join the Bull or Bear camp. When one camp sucks in the crowd and the other camp has been reduced to diehards, contrarians start asking what could go right / wrong.
Right now, it seems nothing could possibly go right. Liquidity, earnings, energy, geopolitical tensions, debt and supply chains are all dismal. Yup.
Is the market a discounting mechanism? So we're told. Maybe the more accurate description is the market is an information processing mechanism that places a premium on new information.
But what everyone knows no longer matters. What nobody yet knows (or the few insiders who do know are keeping to themselves) is what will matter. Contrarians and Devil's Advocates are like scouts sniffing out information trails. What we pay attention to matters, too.
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