Before I get to the main point of this post, I want to point out to readers that I earned my trading stake on the short side. In early 2007 I bought Leap puts on the SPY. By the Summer of 2008 I believed I had enough money to invest full time and quit my job, largely as a result of my short side trades.
Doug Kass, wrote an article today on what an albatross it is to be too negative and I agree. We just had one of the worst dozen years in economic history, with the popping of two bubbles and unemployment going from 4% to 10%. After all these negative events, once dividends are included, the S&P 500 is just as high as it was at the peak of the Internet bubble. The mid and small cap indices are much higher than they were back then.
Pizza at my favorite pizza place cost me $1.05 when I was a kid. The same slice costs $2.50 today. Over time the price of most things tend to go up, stocks included.
I am not saying that one cannot make money on the short side, as I would be a complete hypocrite if I did. I will likely go net short many more times in my investing career. I am just pointing out what a difficult task it is in the long run. Perma-bears are fighting an uphill battle.