Tuesday, February 28, 2012

Doubting Your Doubter or There Is Always A Bull Market Somewhere

One of the first "Old Saws" I learned in my market apprenticeship several decades ago was the adage: "There is always a bull market somewhere". Despite plummeting prices of Greek and Portuguese sovereign debt, the flat-lined bid-side for McMansions in Vegas, Phoenix and non-prime Fla, or real wages for unskilled labour in much of America, the advent of internet coupled with good web-design, and a Silly-Putty-like stretching of the truth, has enabled a definitive bull market in the power of self-invention and consequential rise of the self-proclaimed-though-untrained-expert. 


Nowhere is this more apparent than the sphere of macroeconomics and financial advice, where by sheer force of will, clever obfuscation and exaggeration, or the adoption of an impressive-sounding title, one can instantly step-up onto their virtual soapbox and turn plausible-sounding kernels of truth into dangerous demagoguery. Charlatans abound, creating the financial equivalent of doomsday cults built upon membrane-thin educations, and even finer and more dubious layers of "experience", though never for wont of hyperbole or adjectives.  Such suspicion and derision directed towards the aspirational self-invented commentator is NOT meant to idolize bona-fide, (i.e. more educated and certificated) economists. They too have been known to get it wrong, missing the obvious, as well as being guilty of putting conclusions before objective observation and research. Rather, it is meant to serve as a warning for those relying upon authoritative but tainted 7-Minute Ab equivalent of macro-like advice.  


So, you might ask, what's wrong with the power of self-invention and positive thinking (or in case of the doomsday web-ring, negative thinking)? Can you not be what you aspire to be by sheer power of a desire to be so?  Despite the hijacking of Nichiren-Shoshu, I think not. I do not see how one can place value (other than psychic confirmation of prior bias) on "research" or observations of those whose point of departure is an already-formed conclusion, and who then work backwards, witnessing each and every event through a unitary (often distorted) lens. Oh, they will  inevitably be "right" about some things. And their distillation too, will on occasion, hit close to the target, just as the broken clock will be right once in the day. But how can a perma-view maintaining a narrow static unitary macroeconomic view of the world have value in respect to markets whose relative values fluctuate largely and significantly? 


Bear Stearns lost a 2002 lawsuit involving former Fed Gov and their FX strategist Wayne Angell over advice to a rich and silly Canadian FX Spec named Count Henryk Kwiatowski. Bear's Angell gave advice to the Count who subsequently lost hundreds of millions punting FX. It's a funny docket and should be read in its entirety by everyone with a sense of humour. The Count was obviously sore after taking such a beating while following the advice of Mr Angell and wanted his money back. Bear tried to argue (unsuccessfully) that they, and Angell, were not responsible since he was in fact "an entertainer", and therefore whose advice shouldn't be relied upon. I'd long thought this an amusing, and somewhat accurate line of defense. However, they were found culpable since the court believed there are certain fiduciary responsibilities incumbent upon firms to their clients. As I said, I think their defense WAS apt, up to a point. Angell, despite his FRB pedigree WAS an entertainer. And I put to you, so too are the great majority of newly-minted self-invented  macro-strategist-commentators and members of the doomster-ring. They do NOT have your interests in mind. They have NO fiduciary responsibility, toward you or anyone. And though credentials guarantee neither accuracy, nor impartiality, such charlatans frequently offer little to none of consequence. They are cynically, like Glenn Beck, simple entertainers, parochially-self-interested, scraping a living by media appearances, online advertising, premium newsletters, referral payments for click-throughs, and in some instances, talking their, and their friends books and positions. And if one accuses this pot of calling the kettle black, let it be said here and now that this blog, too, is entertainment, albeit less-tainted and conflicted due to its entirely non-commercial nature. I also, hope it sets itself apart by occasionally eliciting a few chuckles, rather than unending tears. 


So be wary. And in the event you have doubts about doubting your favourite doubter, just consider that your "trusted source of economic analysis" for interpreting the latest US unemployment numbers, Spanish trade figures, or Euro-area CDS-spreads may have just been interviewed on Coast-to-Coast AM, sandwiched in between George Noori's talk with "Crypto-Hunter John Rhodes's Tales of Underground Reptilian Bases"; Greg Braden's exposition about the end of the Mayan 5,125 year cycle which is now meant to be impacting us all; Nostradamus' forecast of the Obama Presidency; and a report on ET Intrusions into America's most secret nuclear weapons sites. Next time, don't forget to have the popcorn ready before opening your RSS reader...  

2 comments:

Anonymous said...

"And their distillation too, will on occasion, hit close to the target, just as the broken clock will be right once in the day."

...

"Cassandra" said...

ummm yes, an awfully sloppy mixed metaphor....