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Every Watchdog Has His Day in the Sun

Book-scouring bears like CFRA's Howard Schilit are now every investor's hero. Has bearishness gone too far?

When the bubble was getting pumped up, the stock market was all about guys like George Gilder. Now it's all about people like Howard Schilit.

But investors who see this as a sign the time has come to scarf up stocks might consider holding off before putting in those buy orders.

Through the


peak, Gilder held many investors in his thrall. In his

Gilder Technology Report

newsletter, the self-styled futurist would opine which company was making the newest new thing, invariably igniting a huge rally in the company's shares. For a while there, Gilder's picks made a lot of people very rich, at least on paper. But over the last couple of years, most have fallen by the wayside, and some have simply ceased to exist.

Of course, stocks have since fallen back sharply as tech spending went into a deep freeze and the entire telecom industry suffered a seizure. Now, in the wake of the collapse of


and the new investor mind-set that sees potentially debilitating risk around every corner, it's the bears who are holding court.

As good an example as any came a week back when


(QCOM) - Get QUALCOMM Incorporated Report

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, the onetime highflier that Gilder championed, came afoul of a negative report by Schilit, an accounting watchdog who heads up the Center for Financial Research and Analysis. Qualcomm's stock fell as much as 12% as word of Schilit's report filtered into the market.

The big downdraft on Qualcomm was hardly an isolated instance. Lately it seems Wall Street and the financial media have been fawning over the professional naysayers -- people such as Kynikos head Jim Chanos, Tice & Associates' Albert Meyer and Gimme Credit's Carol Levenson -- like they used to fawn over Henry Blodget. It makes you think that maybe it's time to buy -- just as it was a good time to sell when people like Blodget and Gilder were kings of the realm.

Yet Hilliard Lyons technical analyst Richard Dickson warns that the rise in the bears' media profile isn't the same as an overt rise in bearishness. Moreover, investor concern over companies' bookkeeping and aggressive use of pro forma accounting is far from without merit, as the last month's wave of earnings restatements illustrates.

"The bears are getting a lot of play right now, but you have to acknowledge that this is a problem that Wall Street is facing," says Dickson.

Meanwhile, measures of sentiment don't show the kind of pervasive negativity that typically comes before a sharp rise in stocks. The CBOE Market Volatility Index, or

VIX, for example, has risen during recent selling bouts, but it hasn't even come close to the levels typically hit during medium-term bottoms in the market. Friday it closed at 24 -- a level that indicates investors are fairly sanguine on stocks.

As for bearishness in the media, while it's true that writers for financial publications have suddenly remembered where they put Jim Chanos' number, general news publications remain fairly upbeat. Legg Mason's Paul Macrae Montgomery, who's made something of a study of media sentiment (a picture of a bear on the cover of


means buy), says he was disappointed in mid-January to see

U.S. News & World Report

with a cover lauding the economy's rebound. It was a sign, he says, that the recovery was already baked into stock prices.

Still, though stocks may struggle to make much headway, thinks Salomon Smith Barney director of listed trading Bob Basel, a steep decline is unlikely. "There's enough negativity out there," he says. "It's just not a wholesale negativity."

What Basel would like to hear is lots of chatter about how stocks are in danger of slipping back to their September levels. That, he says, would be an excellent sign to buy.