Far be it from me to bite the hand that used to feed me. But a headline last Friday morning on BNN Bloomberg perplexed me.

While the network was interviewing Karl Berger of Cidel Asset Management, someone I’ve interviewed and respect, it displayed a banner headline for a good portion of the conversation, which read: BEAR MARKET WARNING SIGNS

What? That was my first reaction. Huh? That was my second. The major stock indices are near record highs. Why are they talking about bear market warning signals?

Here’s why that headline is a microcosm of misplaced narratives often espoused by mainstream financial media that can lead investors astray and to missed opportunities for profit.


There was nothing wrong with Karl Berger’s information. The Senior Wealth Advisor and Investment Counsellor said only one of his five warning signs were flashing red – inflation. But the timing of the topic was off.

It plays into a larger problem that I mentioned recently in a piece titled Scary Headline Alert, about all of the fear-mongering headlines I wade through on a day-to-day basis.

There’s always some outlet quoting some billionaire who says the market bubble is about to burst and it’s going to be calamitous.

Those kind of fear-baiting stories are not helpful for investors because they’re usually dead wrong.

The BNN headline also got me thinking that Keith McCullough, the Canadian-born founder and CEO of Hedgeye Risk Management, (see below for our interview with him) is right when he constantly dismisses most of what’s said in the mainstream financial media.

That’s because his research process, much of which he shares for free, the rest of which subscribers pay for, is solely based on data, not narratives.

Maybe I’ve been sipping too much of the Hedgeye Kool-Aid lately but McCullough and his team nailed it on September 23 when he said the U.S. had transitioned from what he calls Quad 3 – one of his four quads – into Quad 2.

Hedgeye’s quads indicate whether GDP and inflation are accelerating or decelerating. In Quad 2, economic growth is accelerating and so is inflation.

Going further back, in June 2020, Hedgeye determined that inflation was starting to take off, so they recommended buying commodities and commodity-related stocks. Nice call.

Have you been riding oil, copper, coffee and, as trending inflation broadens out, pretty well any commodity you can throw a dart at?

Or have you been following the endless debate in the financial media about transitory versus persistent inflation?

The energy, financials, tech, and consumer discretionary sectors are benefiting in this environment. The bond market gets it too as yields have been rising again pricing in higher inflation.

Some strategists and money managers are also guilty of missing the pickup in growth.

Mike Wilson, Chief U.S. Equity Strategist at Morgan Stanley, a competitor McCullough loves to tease, was calling for a “rolling correction” of as much as 20 per cent in September.


Meanwhile, Barron’s featured a gloomy shipping port bottleneck cover story on October 4 about the possibility of the holidays being ruined. The S&P 500 is up nearly 7% since then.

I love Barron’s and I’m a subscriber but, again, that was a backward-looking, reactive narrative that missed the underlying story that growth was reaccelerating.

Oh, and what happened to the Evergrande is Lehman 2.0 narrative? The debt-plagued Chinese property developer dominated headlines for a few days and then the media moved onto the next thing when that didn’t stick.

We posted an article on September 21, detailing why the Evergrande debacle would not sink stocks. So far, so good.

I was part of the mainstream financial media machine for more than 15 years, and I’m as guilty as the next guy in spouting narratives to explain market moves.

But the more I think about it and the more I learn about the data McCullough focuses on, I realize that BNN, CNBC, MarketWatch, Bloomberg, and most of mainstream financial media, much of which I watch or read and will continue to selectively consume, are missing a lot of the macro data and underlying patterns that signal the probabilities of whether stocks are going up or down.

The market “machine”, as McCullough calls it, is more turbulent and random than we think, but there are patterns to discern (that’s where fractal math comes in) strictly based on reams of data that make up the whole market.

So be wary of clickbait-y, “sky is falling” headlines when you would be better served fading those headlines and focusing on the hard facts – earnings, capital spending, manufacturing, employment, housing, consumer cash piles, etc., all of which currently indicate further growth.

You could make some money the next quarter or two until it’s really, actually time to position yourself for a bear market or Quad 4, i.e decelerating growth and decelerating inflation.

There’s money to be made in that scenario, too. Just not yet.

Related stories:

Playing the Game Out Loud: One-on-One with Keith McCullough

“This Book is Somewhat of a Bible to Me”: Three Must-Read Books From Keith McCullough