Skip to main content
taking stock

It must be comforting in these confusing times to be a convinced permabear or an equally stubborn market bull. While the rest of us wander perplexed through a thick blanket of macroeconomic fog, the market extremists rarely show the slightest doubt about how the future will unfold.

Even at the height of the rebound of 2009 that brought stocks back from the graveyard, the bears never ambled back to their lairs. And today, now that a sturdy recovery in the industrial economies seems some years away, the business of gloom is looking more prosperous than ever.

While Nouriel Roubini, Dr. Doom himself, is confidently predicting more financial crises and bursting asset bubbles, and warning that not even gold is a safe place to hide, the bulls are clinging to their own market verities. Jeremy Siegel, the Wharton School finance prof who penned Stocks for the Long Run, has never wavered from his conviction that this is the best time to be pouring money into unloved equities.

"I have to admire the permabears. They stick to their doomsday scenarios, no matter what," veteran Bay Street economist Patricia Croft was saying the other day. "And I also admire the permabulls: 'Stocks are [for]the long run, no matter what.' I'm glad they can pound the table and say 'Don't buy stocks' or 'These are a once-in-a-lifetime opportunity.' But I just don't feel that way. I have to say that I find myself in a position of significant uncertainty."

In a remarkable 30-year career, Ms. Croft, who retired last week as chief economist with RBC Global Asset Management, has long been a quiet voice of reason and common sense (not to mention one of the earliest female voices in a male bastion) in a business where loud hyperbole usually grabs the headlines. Today, she prefers the middle ground as the place to ride out unprecedented economic and financial storms.

"There have been various times in the last 30 years where you felt you had a good handle on where things were going. But I don't feel like that now. I guess I'm looking for some new guidelines or signposts. But I find these very uncertain times."

Ms. Croft believes that she and other market denizens have been shaped by how they came into the business and that her natural caution stems from her early days plying her craft in the bond world.

"You're very much coloured by where you grew up, and you need to be aware of those biases," she says. "I grew up as an economist working with the bond department [at Burns Fry] I sat right on the trading floor beside the bond desk. Bond guys are the eternal pessimists. They're happiest when there's lots of doom and gloom. So I've always had kind of a cautious approach to investing. Equity people are the opposite. The glass is always half-full. And if they're really bearish, maybe they're 5 per cent overweight stocks instead of 15. But they never go underweight, for goodness sakes."

As she exits the industry, I wonder if she'd care to discuss her best calls over the years. "Feel free to toot your own horn," I tell her.





Characteristically, she declines. "I don't know that I will, because I didn't keep track. I do know some analysts who trot out 'I called this and I called that.' But I didn't keep track."

She did correctly point to the U.S. housing bubble before it burst. "So I guess you could say that was prescient. But boy, did I miss entirely just how awful that would turn out. So I've had some successes and failures."

And anyone trying to boost their forecasting accuracy should stay away from currencies, she says, laughing. "It's a very humbling experience to try and predict an exchange rate."

Ms. Croft's main theme in recent months has been the unexpected collateral damage, to U.S. housing and the labour market, for instance, stemming from the worst financial meltdown since the Great Depression.

"The crisis and the recession are behind us. But now it's payback time," she says. "We had a heckuva party, but we're now in the midst of a heckuva hangover. I think that's where we stand today."

Hers is a voice of moderation that will be missed.

Interact with The Globe