The Trouble With Economists

The WSJ Op-Ed pages remains a fertile ground for debate. Up today is Brian Wesbury — a very nice gentleman I’ve met on various shows, and had a terrific (dare I call it lovely?) debate at the WSJ’s econoblog (Reasons to Pout?) early last year.

Like Brian, I believe the global economy is booming. Unlike Brian, I see the U.S. economy as significantly weaker than the rest of the world. 

But that’s not my main gripe with his piece: Its the concept that the CNBC and Fox are remotely close to offering a balanced perspective on anything:

"If one guest or expert is a "bull," then the other must be a "bear," to
keep things fair. Or, if there is a single guest on air, the host often
takes the other side of the issue in order to keep things balanced. Get
some sparks between guests, a little argument here or there, and it’s
even better for the ratings. The bigger the audience, the better the
show, that’s the way the advertisers see it. It’s basic supply and
demand."

Now, perhaps my own experience is warping my perspective here, but I would place the ratio of Bulls to Bears on CNBC at perhaps 7 to 1. Its the same 5 or 6 guys: Doug Kass, Nouriel Roubini, Gary Shilling, Peter Schiff, Mike Panzner. More recently, Dennis Gartman flipped negative (early 2007), and the pre-dawn viewers see Richard Suttmeier. I cannot remember the last time I saw Bill Fleckenstein on CNBC. This group makes my own views appear relatively moderate. 

Balanced? More like working the refs: CNBC has been called Bubblevision far too many times to count, mostly based on their cheerleading coverage of the 1999-2000 bubble market (They have since markedly improved).  As to wanting to see the sparks fly, that is the Jerry Springer effect; the lesson  many media players learned from Fox News’ success has been to seek more conflict. 

However, to claim that CNBC shows a Bear for each Bull is, on its face, patently absurd.

Bloomberg seems to be the most dispassionate of the business news
channels, rarely raising their voices in either cheering or jeering.
And when they have someone on who is unusually cautious or negative —
like Jimmy Rogers or Jeremy Grantham — its usually because what they say IS news. The goal of Bloomberg TV & Radio is to drive sales of their lucrative Bloomberg machine franchise.

On Fox, its more like 10 or even 15 to 1; I suggested to one of the producers
(off the air) that they should change the name of a certain Saturday morning show to Bulls & Bulls — and have never been invited back since.

Indeed, the reason you remember the guys tagged as a bear is because they are so few and far between.
Over the past year, I often got calls to appear because no one else was willing to come on
and say anything remotely negative.

THIS IS A FUNCTION OF WALL STREET’S
ASSET-BASED FEE STRUCTURE: YOU NEVER SAY ANYTHING THAT MIGHT RESULT IN ASSETS (AND THEIR FEES) LEAVING THE FIRM.

Back to the Trouble with Economists:  The real issue I have with Brian’s Op-Ed piece has to do with this section:   

"There are at least a half-dozen other institutions
publishing surveys, and all of them report very similar results among
the 100 or so active professional forecasters. Except for two
well-known economists (Nouriel Roubini at New York University, and Gary
Shilling of A. Gary Shilling & Co.), who are not in many surveys, a
super-duper majority of professional forecasting economists believe the
economy will continue to expand during the next year and have believed
so for the past four or five years" . . .

In short, over the past five years, forecasting economists from
academia, consulting shops, financial services and industry have a
perfect 5-0 record against a random sample of American citizens. (emphasis added).

That’s a slick trick: My issue is with the phrase "the past five years." That time period was no doubt chosen because it omits the last recession.

Why? There is a specific reason for omitting that time period: Economists, as a group, failed to forecast the 2001 recession. In fact, even when we were smack dab in the middle of it, the group failed to notice it.

AS A GROUP, ECONOMISTS HAVE NEVER CORRECTLY FORECAST A U.S. RECESSION. EVER.

For sure, certain Individuals may have gotten it right, but the collective group has a perfect record of missing the major turns.

~~~

I laid out my views on forecasting several years ago in a column titled "The Folly of Forecasting."

Essentially, most forecasters fall into one of two camps: Camp one are the extrapolaters. They take whatever trend exists at present, and project them out to infinity and beyond. This makes them right in expansions, but causes them to miss major turning points.

Camp two are the anticipators: They look for signs that the present trend is about to end. They often are too early, and miss some of the existing trend in order to capitalize on the reversal. (I have struggled to keep a foot in both camps, sometimes less successfully than others).

The bottom line is this: Economists as a group are a paid part of the Wall Street machinery. They do not get raises or promotions even when they correctly forecast a Recession. Its verbotten. Outside of academia, its even referred to as The "R" word.

~~~

A perfect 5-0 record? Perhaps that’s their pre-season score. But when the big money is on the line, when its crunch time in the SuperBowl, you can expect the entire group of on the dismal scientists — as a whole — to do what they have always done: choke big time . . .

>

>

Source:
Fair but Unbalanced
BRIAN S. WESBURY
WSJ, August 9, 2007; Page A13
http://online.wsj.com/article/SB118662385061692552.html

Free version
http://www.opinionjournal.com/extra/?id=110010446

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  1. Mike commented on Aug 9

    you were far to kind on wesbury…i think some of his economic data points also leave something to be desired…then there is the argument that the reason people feel poorer and the economy seems ok is that people have been using debt to finance their existence…in my mind, that would partly explain the disconnect…

  2. Jack D. Bridges commented on Aug 9

    Well said, BR.

    It never ceases to amaze how much derision is poured on anyone remotely skeptical on CNBC– if you don’t scream Buy! Buy! Buy! everyone just assumes you’re short everything under the sun. Stupid.

    Did you catch David Kotok’s phone call to CNBC this morning…it was so level headed (great guy, Kotok) that I’m surprised they aired it live. His advice: this mess is just beginning. And, avoid financials like the plague.

    Of course, when the market is down 200 today, they will trot out the same Pollyanas who all say this is the best buying opportunity in years. If I didn’t have long exposure (along with my shorts), I would be falling off my couch laughing.

    Best of luck to everyone today…it’s going to be interesting.

  3. SINGER commented on Aug 9

    Reading Fooled By Randomness on the plane today…Perfect timing…

    Beware of people on TV claiming they “know” or can predict anything…

    also,the economists repeated inability to predict recessions…It’s not like they lack education or funding…

    holla

  4. zell commented on Aug 9

    The problem, Barry, is that you are both a realist and a philosopher – a rare combination. You’re also too polite/ civilized. I don’t tune in on any of your media appearances anymore because I can’yt tolerate the baboons and jackals out there jumping all over you. I never watch that garbage otherwise. They’re just another form of game show.

  5. W.Edwards commented on Aug 9

    And don’t forget the mantra of “resilient consumer spending” as justification of strong US economic growth assumptions. As noted on this blog, same store sales and auto sales have been weakening (save some low-end retailers helped by food-based inflation) and some early numbers for July look equally troublesome. I’m certain that this will be minimized by some calendar effect or tax effect or back-to-school effect. But once this downward trend becomes more established and the pillar of support starts to crumble, this should add to the stock market woes. It’ll probably take economists another 2-3 months though to figure out that something is wrong!

  6. Bucky Katt commented on Aug 9

    Brilliant piece Barry.
    Haven’t we seen the lying Wall Streeters (like Kudlow) bleating for some time now that subprime problems are over and contained?
    The news out of Europe this morn says different.

  7. bjk commented on Aug 9

    Listening to the bears only costs you money. Except in 2001, but any idiot could have seen that coming. The bears will always talk about some ticking derivative time bomb, or some contagion about to spread, or the overleveraged consumer (that’s a perennial), or some bank about to fail, or the impending glut in tech/housing/etc. etc. And the market just chugs along, utterly oblivious to the splutterings of the bears who think they know better.

  8. Ross commented on Aug 9

    Off topic. The subprime submarine launched 3 torpedos and hit a frog merchantman. Hans, reload the stern tubes.

    I have an idea. ALL hedge funds should be chartered in the Galapogos. I’ve always wanted to see a winged but flightless investment banker. Easier to catch.

  9. REW commented on Aug 9

    BR, you lost me.
    The first half seems to blame CNBC and Fox for overwhelmingly promoting the bullish view, but in the second half you point out that there aren’t that many bearish pundits willing to state their case publicly.
    Sounds like the pundits with conviction are actually mostly bullish.

    You know from watching the other media that fear sells. CNN and FOX, TIME and BusinessWeek, et al frequently focus on disasters, bubbles, unsafe SUVs, toys, petfood, etc.

    The idea that the reasonable position is to be bearish, but the bearish view cannot get fair is silly.

  10. dblwyo commented on Aug 9

    Well, to be fair Paul Kasriel was on a few times in the last couple of weeks :). And think of it for you, as I’m sure you do, as a marketing tool. Since you’re sui generis you’re going to get airtime – even though Larry seems to take great pleasure in feeding you more sulpher than molasses. (Adm. Nimitz to Capt. Torrey).
    Would this be a great time to mention a) Ellis’ “Ahead of the Curve” again ? and b) Kasriel’s Northen Trust commentaries and outlooks (daily, weekly, etc.) ?

  11. Mr. Obvious commented on Aug 9

    Aside from Brian’s perpetual optimism, what I took from his piece is: so what if 2/3 of Americans foresee a recession? they’ve said that for the last five years.

  12. jswede commented on Aug 9

    Funny Brian did not pat himself on the back when he had the chance: he did, in fact, predict the 2001 recession. He was the first, IIRC.

    In late Nov 2000, after the 11/15 meeting left FF at 6.50% for the 5th straight meeting, and cited “inflation” concerns with no further bias, Brian came out and predicted deflation and recession. He was laughed at – on CNBC, WSJ Op-Ed, and elsewhere. “Deflation???” Few things seemed more absurd.

    A few weeks later, at the 12/19 meeting, the Fed left rates at 6.50% but cited “weakness”. 2 weeks later, on 1/3/01, emergency meeting: the Fed cut 50. A few more economists followed Brian’s lead.

    Then the Fed with 50 again on 1/31. Then 50 again on 3/20. Then another intermeeting with 50 on 4/18. A few more economists came out of the woodwork. Another cut at each meeting (and one more inter-meeting) for the rest of the year – rates were at 2% one year after Brian first made his call – and just about everyone was on board.

    Inasmuch as he seems optimistic now (and believes in America almost as much as Kudlow) – he’s not a one-trick pony and is worth listening to, imo.

  13. Adam commented on Aug 9

    How funny is the news today that BNP Paribas “stopped valuing” 3 of its funds after liquidity seized up in U.S. subprime market? It’s like the losers refuse to ackowledge their own stupidity and foolishness. “Hey, if we don’t price the securities in our portfolio, we can’t possibly recognize a loss.” Hilarious. This is going to get way worse.

  14. michael schumacher commented on Aug 9

    Ironic that this whole credit issue mirrors the same exact problem that sellers of homes have:

    “my house is worth x and dammit it’s worth x cause I say so”

    How different is the ABX market from the housing (sellers)market??

    Not much from where I sit.

    Hank Paulsen to the rescue…..

    http://fms.treas.gov/tip/auctions/tio-announcement-356-08092007.pdf

    Anutha $9 billion to the brokers. The big difference is today is that some “lucky” broker has the chance to get half the total amount “awarded” to them. Like maybe to buy GS and BSC stock at several clips above ask? That’s what happened in the first 15 minutes.

    This is just getting started with regards to Europe and Asia.

    Ciao
    MS

  15. Ross commented on Aug 9

    The best economist in this fair land is Ed Hyman, founder of ISI Group. Modest and reserved, Ed used to call on me from C. J. Lawrence back in the stone age 70’s. I’ve second guessed him on numerous occasions and have been wrong every time. Oh, and he is a Texas boy which makes him bigger than life…

  16. Francois commented on Aug 9

    Reading this entry, memory throws me back several years, circa 2000. That was when I believed there was still a ounce of common sense and honesty within the financial institutions.

    Not anymore; the system is way too far out tilted against the individual investor. Rules, regulations, laws, you name’em, read’em and annalyze’em. NONE has enough teeth to hold Wall Street accountable. They’ve seen to it, and the political campain financing system has allowed this and much more. That economists are part of this problem is axiomatic. Their income depend on it.

    Bottom line: We, the people, are more and more alone and vulnerable to those who have prospered under this New Gilded Age.

    The only saving grace left to the working stiff is to self-educate, never assume ANYTHING, always ask tons of questions, and NEVER, EVER accept any statement from anyone in the financial media before submitting them to a merciless selection and cribbage process.

    I have no hope this situation will change before my demise. Maybe, just maybe, our kids will see (and maybe force) a change for the better. But we sure screwed up the social fabric of this country big time, haven’t we?

    Good job everyone.

    Francois

  17. Aaron commented on Aug 9

    He has a point about fair/balanced but citing Fox News as a bastion of journalist integrity is questionable, even before the NWS/DJ deal.

  18. Caroline commented on Aug 9

    Things must be really bad when they go to Malpass and Wesbury in the same week”

  19. michael schumacher commented on Aug 9

    un fucking believable…….

    I suppose when the whole world gets massive infusions from there own CB’s then this is the result. Welcome to the “what me Worry” economy.

    and the NASDAQ goes green……fucking priceless..

  20. wunsacon commented on Aug 9

    Schumacher,

    >> Anutha $9 billion to the brokers. The big difference is today is that some “lucky” broker has the chance to get half the total amount “awarded” to them. Like maybe to buy GS and BSC stock at several clips above ask? That’s what happened in the first 15 minutes.

    Does giving brokers more capital necessarily result in buying? Why can’t these lucky brokers actually go short on some tickers (maybe thru some Ryder ETF…)? If you’re a broker and expect more trouble ahead for financials, what would you do instead with the cash?

    Also, you’ve mentioned before that these “temporary” operations aren’t temporary. How do you know the repos are (in practical terms) of unlimited duration?

    Just wondering. Thanks.

  21. The Financial Philosopher commented on Aug 9

    Nice observation, Barry. I know you already believe this, but “media noise” clouds the brain. That’s why I don’t have cable, satellite, or any “pay” television. I have no idea who those people are that you mention in this piece and I saw Jim Cramer for the first time in my life last week when I was on vacation…

    I’ve found that a good balance of books, music, and a diverse “portfolio” of blogs and internet news sites limits the “wealth of information,” which leads to the “poverty of attention.”

    That’s why I appreciate the best bloggers who are typically “news junkies.” They dig through the junk so I don’t have to!

    Thanks again for the observations…

  22. AD commented on Aug 9

    Actually, from my data, economists have correctly predicted 12 of the past 5 recessions.

    Ahem.

    It’s a point to be considered; future predictions are generally unreliable for all kinds of reasons. Even elegant, complex, and robust predictive models routinely break down horribly thanks to the base assumptions they were made on changing more rapidly than anyone expects.

  23. GerryL commented on Aug 9

    As you have pointed out recently CNBC got a lot of bad press after the bubble and appeared to be making an effort to not cheerlead. However, lately they have gone back to their old bad habits. I have noticed even some of their old timers who tried to be journalists and not cheerleaders have lost some of their objectivity. It is amusing when there is a real bad day and very little is positive they like to find the positives.

    I find myself watching Bloomberg because they really seem to try to be objective.

    BTW, I have seen Bill Fleckenstein on CNBC’s Fast Money a few times in the last month.

  24. me commented on Aug 9

    Blaming the two thirds that think this economy is in recession on CNBC and Fox is stupid. I have news for Westbury, the little guys don’t watch cnbc or Fox. As a matter of fact nobody watches CNBC or Fox. They reach in their wallet and have no money, they see the guy next to them have their job move to India or Brazil and guess what? They don’t TV or Paulsen or Bush to tell them how great things are. They know.

    Don’t tell them unemployment is low when they can’t find a job. Don’t tell them the US is booming when hey can’t refinance their ARM, that Greenspan said we should be using.

    Reality trumps propagandist like Westbury.

  25. Greg Feirman commented on Aug 9

    Great post, Barry. I think the your account of the two different schools of forecasting is right on. Good stuff.

  26. Davis Hall commented on Aug 9

    I see a real problem ahead, Ben Stein, Kudlow, and Jim Cramer and his comments, “My people are losing their jobs and these firms are going to go out business”. I think there’s something strange and insidious happening in American stock market. William Shakespeare’s said in this play, The Merchant of Venice, Act 1, Scene 3, “About my moneys and my usances”. This is going to get out-of-hand and I hope there will be some self-restraint on their avarice renderings.

  27. KirkH commented on Aug 9

    The beauty of the internet is that these schmoes’ crappy calls are immortalized on YouTube. It’s getting harder and harder for CNBC to trot out authors of DOW 100,000 while expecting viewers to not wonder what the hell is going on.

    I guess they can just bring in greenhorns at that point who never burned up their credibility but then Kudlow would be forced to bring on teenagers to debate your POV.

  28. MT57 commented on Aug 9

    I sort of have a mixed view on this debate.

    I think you are right that business television is generally bullish to an extreme and many of their guests are incentivized to be bullish for the reasons you state.

    I also think that the business media is very prone to overreaction and overstatement based on the most recent events. I think this would have been a better theme for Wesbury to focus on. Because on a macro level, the economy never get as good or as bad as the events of the day, taken in isolation, would suggest. Rather than “bull/bear” bias, Wesbury should have focused on “long-term/short-term” bias.

    Finally, I think much of the daily business print media is unable to comprehend basic financial matters, is highly susceptible to inconsequential anecdotal evidence, and is driven very much by the fact that the reporters and editors make far less than anyone who has succeeded in business and are in a business that is in an irreversible downturn that frightens them.

  29. Michael Schumacher commented on Aug 9

    wunascon-

    taken from ETF digest.
    http://www.etfdigest.com/index.php

    No matter your point of view, you have to give the bulls a hand–perhaps a real “shout out” even! With all the bad news around and some folks screaming Armageddon if the Fed doesn’t cut, you’d think bulls might be just a little gun shy–but no.

    There are plenty of conspiracy theorists around pointing to these end-of-day jam-jobs as the work of the Fed, the Treasury and/or the Plunge Protection Team; but, the bottom line is we just don’t have any facts to support these claims. What we do know is that hedge funds and trading desks are in control of markets. Retail money flow to has been flat to negative. Wall Street trading desks have gotten the majority of their earnings from “trading” and program trading accounts for nearly 40% of all trading activity. Further, brokerage firms and mutual funds are fee addicted and they have learned to do all they can to keep money from walking out the door. That, coupled with the cheerleading from the financial media [bears don’t advertise], gives the bullish bias a shot of adrenalin.

    The Treasury discovered in 2002 that they could lend excess tax receipts to their network of primary dealer brokers short-term. There’s nothing wrong with this since you might as well earn some interest on these funds until they’re needed. But, one must wonder if it’s a mere coincidence that this activity corresponds to higher trading profits for these firms? It seems as logical a conclusion as B following A. Over the past two weeks the Treasury has been unusually active in these lending activities.

    Beginning August 1st there have been daily loans which now total $37 billion just like the gonzo one featured below from today. That’s no mere bag of shells for “Da Boyz” to use. “–end of story

    Actually if you go back a bit further the total is now almost $80 billion…Going back to July 24th with one day of no auction…July 31st. As far as I am concerned this is not the PPT at all.

    It’s the brokers, frankly, and we are just allowing it to occur because no one has an interest in saying anything about it or trying to stop it from exchanging a bloated real estate market for a bloated stock market. The people in charge don’t give a crap because they will all be dead when the bill comes due.

    It’s just totally dishonest to use taxpayers money (disguised as an auction) and hand it over to the very idiots responsible for this mess in the first place. Why talk about a bailout when it’s happening right under our very noses

    Ciao
    MS

  30. JWC commented on Aug 9

    I caught you on Bloomberg the other morning. I NEVER watch you on Kudlow cause I can’t stand the guy and I never every watch him.

    Thanks for your interesting post. I come here every day.

  31. Dervin commented on Aug 9

    Well to determine how the major news corporations cover Wall Street you have to look at how they make their money. CNBC, Fox, etc make their money on advertisers, brokers, mutual funds, etc. They are selling the viewers to the advertisers. They have a bias to keep their viewers in a buying state. Bloomberg, they are in the process of selling their information. Bloomberg makes their money by selling their content – so they have to get it right.

  32. Michael Schumacher commented on Aug 9

    Just me but I think Goldman is (yet again) lying there ass off. Stock is free-falling

    “everything’s just fine…biusiness as usual”

    Ciao
    MS

  33. BDG123 commented on Aug 9

    Wall Street economists are neutered billionaire wanna-be’s in drag.

    Recent survey: 50 out of 50 economists expecting economic growth. Now who knows, that might actually happen by some wild stretch. But, it won’t save equities.

  34. chris commented on Aug 9

    *delurking*
    Personally, I stopped watching financial TV back in ’99 when some guy with a SHINY GORDON GEKKO HAIRCUT was telling the world that JDSU was worth at least a thousand dollars. Yes, a share.
    I stopped reading the financial press in ’00 after a nodding acquaintance told me about an article she’d read. On the strength of said article she and her husband were borrowing money to buy more NT for their retirement.
    Blogs like this tell me everything I need to know about the big picture stuff. As a mere cockroach on the trading floor I often wonder if I even need that since I don’t understand a lot of it.
    Anyway, my question is: does anyone know of an economist being fired, or even disciplined, for being wrong?
    *lurk*

  35. Michael Schumacher commented on Aug 9

    MHM-

    Since you have a hard time understanding the difference between what the Fed does and what the Treasurey does I really do not need to bother looking that up as you’re the one who has the confusion. Cute putting it in German…

    BTW please explain to me how taking what the Treasurey calls “excess tax receipts” and then loans them out to the dealers. Sure they have to be paid back but when you make more than the interest rate by shoveling them into the equities market (driving it up ) you start to see how this whole thing is accomplished. When the schoolmaster says “I’m only going to give it to you if you do as you’re told” you sort of comply because you know you will get more.

    It may be called a REPO…and it may be taken back out (I’ve yet to see a reverse repo by Hank) but what you are describing is not what is being done with it. if all you have is some textbook definition of what “should” occur…and you actually believe it then I have some “investment opps” for you in some high grade structured leveraged 10 times over Alt-A class bonds that you may be interested in.

    Ciao
    MS

  36. Michael Schumacher commented on Aug 9

    Here’s a fact MHM

    From July 24th- August 9th the Treasurey Department (not the Fed) has had auctions EVERYDAY with the exception of July 31st.

    The total amount of these auctions add up to approximately $78.5 billion dollars. Again this does not include ANY FED activity.

    Now I know you are a smart person and can follow me here. What type of news did we start hearing about towards the end of July?? yes those dreaded credit “issues” that are “contained. Now any reasonable person can see that Hank and his pals have increased the amount of money available to these brokers as the news about there activities was starting to get out to the public. How anyone can remotely support giving more money to the people that created the “issues” in order for them to continue to do the same thing is beyond my little german realm of comprehension.

    I’ve gone through the ENTIRE list of these auction results. They paint (pun intended here) a very sobering picture as to the movements of the markets when plotted against the news “issues” that seem to somehow surface right after Hank decides to let loose with your money.

    So spare me the attempt at education as you are entitled to your own opinion however that’s just what it is an opinion…….. just like mine.

    If you don’t like it….don’t read it.

    Ciao
    MS

  37. mhm commented on Aug 9

    MS,

    the TIO collateral is less strict, eg. mortgage that was not securitized (MBS).

    What is made of the credit received is up to the parties involved. You *think* is is used to “rig” the market in the direction that hurts your position, but that does not make it so.

  38. Michael Schumacher commented on Aug 9

    And your textbook definition does not either…but I expected that as a response from ya anyway.

    Don’t actually take anything I’ve said as the truth…go look it up yourself. It requires that you make your own interpretation…something that I think you are unable to do with this because that would mean you would tacitly agree.

    THIS IS NOT ABOUT HURTING A POSITION OR BEING ON THE WRONG SIDE, WHEN WILL YOU PEOPLE UNDERSTAND THAT???

    This is a question that requires no position(in the market) to discuss…..it’s about responsible monetary management and the lack of checks and balances within our gov’t.

    If someone else can contribute to this…then by all means fire away……I’m looking to understand this just as much as the next guy but when you steadfastly deny that anything “below board” can occur in this type of operation then………well BSC has some investments for you.

    Ciao
    MS

  39. Randy commented on Aug 9

    “THIS IS A FUNCTION OF WALL STREET’S ASSET-BASED FEE STRUCTURE: YOU NEVER SAY ANYTHING THAT MIGHT RESULT IN ASSETS (AND THEIR FEES) LEAVING THE FIRM.”

    Thank you for having the integrity to write this sentence. Admitting that you have a problem is the first step to a cure. I’d love to hear what you think about fixing this problem.

  40. David in DC commented on Aug 9

    Don’t omit the basic political bias at CNBC. Not once in the last month have I heard anyone point a finger at Bush and Co. for this debacle. Bush needed ‘record home ownership’ to win the swing states in 2004. Then there’s Stammerin’ Hank Paulson, probably the least articulate public official in memory. This man was at the head of GS but he still missed this tsunami? WTF? If we had a Democrat in the White House today there would be no end to the vitriol and blame directed at them for a mess like this by the financial media.

  41. slick commented on Aug 9

    As someone who has been in the financial services industry (as an advisor) for close to 20 years, I applaud this excellent and truthful post. Bravo. I dont’ agree with all of it, but the main points about Wall St. and economists are spot on.

    However, while I am painfully aware of the lies, deceptions, and BS in my industry (something I constantly struggle to come to terms with, as I seem to be one of the very few around my office with a conscience), ultimately the blame lies with the CLIENTS.

    I’m so tired of hearing endles rants about how it’s “THEIR” fault (i.e. somebody else). Nope. It’s the public’s fault. We get the politicans we deserve, and we get the financial system we deserve. Why? Because the masses are blissfully ignorant, lazy, ambivalent, greedy, irrational, etc.

    Does it excuse the corrupt b@st@rds? Of course not! But the ignorance and complacency *ALLOWS* them to get away with what they do.

    e.g. At no point in my life (I’m 44) have I ever taken on more debt than I knew I could handle. It’s called being financially responsible. So while I won’t excuse the dispicable wh0res who hard sold people into mortgages they couldn’t afford, I also won’t excuse or feel sorry for the ignorant dupes. Nobody put a gun to their heads and said “sign here!”.

    Issue after issue, I hear the same whining. And it all comes down to lack of responsibility. Sorry for preaching, but that’s the way I see it. What good does it do to blame others or rant? DO SOMETHING ABOUT IT!

    As for my industry, the sad reality is that clients (investors) don’t want to know the truth! They actually prefer fantasies! I’ve seent his time and time again. Maybe 2 or 3 out of 100 have the right approach and attitude.

    My point is that the vast majority of investors are totally clueless – and that’s THEIR choice and THEIR responsibility.

    So in addition to blaming the ones who run the corrupt game, you should at the very least equally blame the masses that line up to eagerly play it!

  42. techy2468 commented on Aug 9

    Michael and MHM.

    i am not a true believer of PPT and things but if the current administration wants to leave office on a happy note….and they are willing to do anything to make it look good……what stops them from printing couple of trillions so that the party can go on for another 18 months??

    can you imagine how GOP will fare in the election if we were in the middle of a recession in 2008.

    why will they not want to stock market to go down, its very simple…. common man on the street looks at the indexes and thinks that economy is doing great if indexes are moving up……he does not get hurt till he loses his job or till inflation goes out of hand……but as per my knowledge unemployment does not happen till the last hour.

  43. Zephyr commented on Aug 9

    Should bull and bear economists be interviewed in an equal ratio, or in the ratio that they actually exist in the real world?

  44. Zephyr commented on Aug 9

    My favorite quote about economists:

    “An economist is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today.” — Dr. Laurence J. Peter, Author of The Peter Principle

    So very true…

  45. wunsacon commented on Aug 9

    MS,

    The fact that the auction amounts are increasing lately suggests that the auction itself IS meant to stabilize markets. That supports your view.

    But, I don’t “get” a couple of things. These treasury auctions have a definite term, right? So, for all the auctions that took place 3-6+ months ago, isn’t the cash all coming due now? Doesn’t that offset the new cash being pumped into the market, so that there’s no net benefit unless the amounts increase dramatically? (Well, that seems to be happening.)

    Also, can’t brokers find a way to short with the money instead of go long? Or do you think they’ll prioritize the government’s interest ahead of their shareholders?

    Thanks.

  46. Winston Munn commented on Aug 9

    wunsacon:

    The best source of information I know about Fed and FCB action is from Lee Adler at Wall Street Examiner.com

  47. wunsacon commented on Aug 10

    Thanks, MS. I’ll follow up on that.

  48. wunsacon commented on Aug 10

    Oops. Thanks, Winston. I overlooked that you answered on behalf of MS.

  49. Si commented on Aug 10

    Slick,

    Best comment I’ve seen on here in ages, said everything thats going on in my mind.
    Heard a great comment the other day, ‘the public have a right to their own stupidity, just don’t some looking for a bale out when it blows up in your face’.
    The same could be said for the quality of our leadership.

  50. MaxSpeak, You Listen! commented on Aug 10

    THE MONETARY ECONOMIC THOUGHTOF BENJAMIN BERNANKE

    “Savers and their financial advisors know that to get the highest possible returns on their financial investments, they must find the potential borrowers with the most profitable opportunities. This knowledge provides a powerful incentive to scrutinize…

  51. John commented on Aug 10

    Barry, saw you on Kudlow and you even got the odd word in. That guy is so transparent about the way he insults people’s intelligence it has to be seen to be believed. Obviously, peddling happy talk is what their all about because that’s what the advertisers want, but given that the audience demographic posits minimal financial literacy, the level of discourse is awful. Anyone wanting to enter a realistic note is shouted down either by him or one of his guests most of whom have incredible conflicts of interest. I suppose someone has to do it and I understand why. But what an arena.

  52. John Steinsvold commented on Aug 13

    The following link, takes you to a “utopian” article, entitled “Home of the Brave?” which I wrote and appeared in the American Daily which is published in Phoenix, Arizona on March 14, 2006.
    http://www.americandaily.com/article/12389

    John Steinsvold

  53. The Big Picture commented on Sep 13

    Goldilocks is Now “Officially Dead”

    Last night, we had an open thread on the Falling Dollar, Rising Gold, Oil, Inflation. One of the articles I referenced for discussion was this WSJ piece, Forecasters Increase Odds Of Recession Over Next Year. If you click through to the full survey, a …

  54. Eclectic commented on Sep 13

    An objectivologist’s view:

    1) – Outside of the natural tendency for most people to be optimistic and bullish, and excepting the historical tendency for bullishness to be the correct approach, CNBC is not nearly so biased as you say. Too there has been a significant increase in bearish or worrisome commentary about the economy and markets recently on CNBC. It’s even detectable in Joe Kernen’s commentary if you pay attention. You’re even using Kudlow as an example of this.

    2) – My guess on the ratio of bulls or bullish sentiment/commentary to bears or bearish sentiment/commentary on CNBC recently is no higher than 3:1 and maybe is as low as (1.5 – 2):1 although I don’t expect it would be possible to evaluate every minute of a 24-hr. broadcast in order to prove it, or to get a doctorate in Objectivology… but then I don’t need one… I’m already Eclectic for heaven’s sake!

    3) – I’ve decided to go out on a limb. Maybe it’s like throwing down 2 cards and asking the dealer for two chances at an inside straight, but here it is:

    ***No cut in FF… I don’t think the FF rate will be cut***

    Maybe it’s silly folly to think so, but to cut the FF rate would run contrary to every reasonable expression of common macroeconomic sense according to the teachings of one so highly honored as Milton Friedman was honored. The spirit of the man runs through the pumping blood of the FOMC. We will see.

    It’s simply my own personal opinion, and I’ll be here Tuesday along with all of you and we will see what we see.

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