Complacency & Concern

Cas Piancey
6 min readMar 1, 2021

While certain truths may be evident, that doesn’t mean everyone agrees. Of course, in our collective reality this feels like a first, but history proves otherwise:

  • how can people question science? (see: Galileo)
  • aren’t people concerned about oligopolies? (see: every industry ever)
  • this isn’t irrational exuberance, [[it’s different this time]]

And yet (forgive the clichés), history doesn’t repeat, it rhymes.

A Broken Clock

It’s easy to state that all market bears are built from the same genetic makeup, but that’s too simple.

There’s many different kinds of bearish market participants, from stock specific shortsellers like Harry Markopolos to permabears like Nouriel Roubini, that to pretend they’re all wrong all the time is to do yourself a disservice.

I have my own personal categories of bearish market participants and it looks something like this:

  • single asset, fundamental analysis-based shortsellers
  • macro-econ bears
  • technical analysis-based traders, who regularly flip

In years previous, as evidenced in films like The China Hustle and by activist investors like Bill Ackman, the primary objective of FA-based shortsellers was to announce a large short to vibrant fanfare. There was a reason for this.

As seasoned, wealthy, respected, and loud investors, announcing a short and attempting to provide public proof of fraud or other malfeasance would allow traders to jump on board the short train and send the stock price lower. This worked for a long time and genuinely led to some horrible companies being tarnished and irrevocably damaged.

And wow, things have changed. Quickly.

The End of Shortselling FA

In one swift blow the practice of trumpeting short hypotheses came to a crashing halt. How? GameStop.

Don’t get it wrong: shortsellers have repeatedly been ruined by similar mechanics (the previously mentioned Bill Ackman and his attempt to send HerbaLife to zero is a prime example), but never by retail investors. We’ve entered a new era of trading, and in this era it’s far better to quietly short a stock and hope that it falls apart on its own, not attempt to drive a fraudulent company into bankruptcy.

Why is this? Because retail investors control a larger portion of the market than they ever have before, and retail doesn’t really care all that much about the structure or mechanics of the marketplace and the complexities of corporate fraud, they care about ROI:

The Renewed Rise of the Retail Investor

It’s my personal belief that the ease of entrance into options and margin trading has skewed these metrics even further than what’s visible in terms of share ownership.

What’s going on is the weaponization of the tools available by retail to hone in on anomalies and take advantage of them. In the case of GameStop, this was overextended shorts getting destroyed by a slew of small buyers and OTM call option traders.

Going into this multibillion dollar liquidation event, many people, including myself, believed that naked shorting was 100% illegal in the United States. This isn’t the truth.

Credit where credit is due: DFV, other value investors, and r/WallStreetBets found a naked short and bet against it with everything in their power — in essence, they succeeded. Melvin Capital had to be bailed out by their buddies at Citadel and Point72, GameStop is currently trading well above what shortsellers were calling for — the $20 range (sitting at ~$120 at the time of writing), and many people became almost overnight millionaires.

There’s a new problem now.

How can shortsellers, while admitting they do what they do for money, ever announce a short again?

What are the consequences for self-regulation in a marketplace where short sellers fear calling out frauds?

The Psychology of Froth

At this point, in traditional, commodity, and cryptocurrency markets it’s tough to find anyone who won’t admit that there’s froth. Froth, as with warmed milk in a cappuccino, amounts to bubbly murkiness, with an inability to see what’s below (in finance, that’d be the ability for accurate price discovery). But, as is obvious from what occurred a year ago, frothiness doesn’t mean immediate collapse:

The Dow Jones Industrial Average has nearly doubled since its low last year.

So this brings us to the alternative bearish participants: macro bears and TA-flippers.

TA-flippers thrive in a volatile environment, like the one seen last March, and again in June and November. If you’re good at trading in volatility, these are precisely the types of markets you want to trade in.

In the meantime, however, the market — well, every market pretty much — has been on a relentless tear up. This has been several years of, “The only wrong asset allocation is cash.” And there’s absolutely no denying this. Macro permabears as of 2021 are, for lack of a better term, BTFO.

Don’t write them off, because their concern is founded. Some individuals can make money while assets go up or down, but most aren’t fast or skilled enough to properly time the market to a T. Keeping that in mind, and knowing that frothtotal collapse right away, historically froth up is what bubbles do before popping.

Left: The Nikkei 225 has never recovered from it’s 1989 peak — still roughly 10,000 pts less than 32 years ago. Right: Nasdaq during the dot-com bubble.


We’re at that part of the cycle where everyone’s saying “we’re at this part of the cycle.” The beauty of markets, though, is that they’re unpredictable — very few can time a parabolic rise and sell the tippy top. I can say this without feeling absurd nonetheless: I refuse to tell people my general market sentiments because I haven’t a clue how high all these assets could go, nor how far they will eventually crash down. For all I know the DJIA could triple from here, Bitcoin could go to a million, and Tether could suddenly be pegged 1 USDT = $10. Anything is possible and I have no right to proclaim otherwise.

Yet stirring in my mind, even after expressing all of that, it’s impossible not to imagine this was the sentiment of many before the 1991 S&L crisis or the Great Depression. Frauds abound, money is flush, “everyone’s getting rich except you,” and “your barber” is telling you about their latest big stock pick (this time it was OTM AMC calls, not like last time when it was buying a hundred shares of a penny stock).

This is to say that there’s a lot of problems in the market right now: new market participants utilizing tools they possibly don’t fully understand, leveraged trading, naked shorting for me but not for thee, societal FOMO, anger at financial institutions for seemingly unfair business practices, influencers publicly advertising for volatile assets…

Few, if any, of these issues are being addressed, and with every market immediately silencing any dispute with an upward-bound number, no bear could possibly feel comfortable voicing a strong opinion. It’s this silence that now resonates.

When the bears can no longer justify being bears… maybe it’s time to become a bear.

Stay skeptical, friends.