I have a confession to make. I like betting against companies. I enjoy it! There’s nothing more thrilling to me professionally than catching a company’s management team with their hand in the cookie jar and watching the stock price implode when their shenanigans are exposed. But, just because I’m a short seller doesn’t mean I’m a “permabear.”

There are appropriate times to allocate to stocks and there are times that aren’t so good. In my opinion, right now we are in one of the latter times.

Right now, we’re in the riskier end of the spectrum, and allocating to equities at this point is likely to yield well below average returns.

In the past six years, the stock market has gone nearly straight up. To make money, all one had to do was buy the glossiest growth story and hang on for the ride. Many investors are still foaming at the mouth over these successes.

But, let’s take a look at what happened in one of the biggest bull markets of all time.

One of my favorite studies is called the Capitalism Distribution, which suggests a very small minority of stocks are responsible for nearly all of the market’s gains. It was presented by BlackStar Funds.

In it, they showed that from 1983 to 2007, the Russell 3000 was up 900%. But not all of those stocks were winners.

In fact, 64% of stocks under-performed…

39% of them outright declined…

19% fell by 75% or more…

And only 25% accounted for all of the market’s gains.

To a certain extent, that’s just capitalism.

For every Microsoft (MSFT), there are 40 dead software companies that didn’t make it through the personal computing revolution.

For every Wal-Mart (WMT), there’s dozens of retailers that no longer exist because of inferior distribution, pricing power, and technology.

What’s more, the leaders from one cycle are seldom the leaders of the next. Kodak (KODK), General Motors (GM), Polaroid, Bethlehem Steel and many other former giants were once core stock holdings that spiraled to $0. And that was during the best market of many of our lifetimes!