A Losing Bet: The End of the World
If you are reading this, it means that the end of the world, previously scheduled for 1994 Saturday night, did not occur.
Why anyone pays attention to these dang fools is one of the more annoying vestiges of the 2007-09 recession and market collapse. The rise of the cranks is a classic example of the Recency effect, an after the fact, 20/20 hindsight, rear view look at the world.
Not just the eejit End-of-Worlders who have been with us since the beginning of time. There have also been a slew of broken watch pundits who have enjoyed an undeserved credibility following the crisis.
Who are these Doom & Gloomers? They include:
• Crisis rock stars;
• Goldbrickers who missed the equity rally;
• Thinly veiled partisans;
• Hyper-inflationistas;
• Conspiracy theorists!
• Austerians;
• Analysts trying to turn one good call into a new business model;
• One sided web sites that never see anything positive;
• Specialists in Recession Porn;
I don’t have to name names — you can do that if you want. I am compelled to point out that this crowd not only is enjoying undeserved credibility, they are NOT making their followers money. Listening to their advice, their readership missed the greatest market rally in 4 generations, but they piled into commodities in time for a major collapse, got frightened out of munis that have no credit issue or default threat, and have otherwise missed opportunities and lost capital.
I have never been a perma-bull — not only because its money-losing to be one-sided, but also because throughout most of my career, equities have been over-priced.
The bottom line is simple this: You best understand the motivations, track record, and credibility of the people you choose to read before you allocate any capital based upon it.
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May 23rd, 2011 at 9:10 am
Old forward forex traders joke for just such events as the one above:
Dealer A: ‘Hello? Spot/End of the world please – in size’
Dealer B: ‘ Sorry mate, we don’t quote short dates’
May 23rd, 2011 at 9:43 am
Uh, guilty. Fell for “One sided web site that never sees anything positive”, while also enduring the pain of reading that anger. Lost out on almost 20% of the rally.
Truly, thank you for pointing out the cause of this mistake so clearly. I was incapable of seeing it in those terms.
May 23rd, 2011 at 9:49 am
What if it did occur and we all shifted to the same parallel universe that is nearly identical to our prior existence?
May 23rd, 2011 at 10:01 am
Imagine the universe as “concentric” bubbles, the innermost bubble is the known universe, it dissolves and the next universe becomes the new known universe (with some additional unknowns yet to discover).
May 23rd, 2011 at 10:04 am
There are two side to this story. Listening to the Goldbricker’s and some of the doom and gloomers allowed some to miss the greatest market crash in 4 generations. I’m sure you’ve seen the DOW/Gold ratio. And where is gold today, $1500? Wow that’s quite the crash!
Now I’m sure gold will correct sometime, but for a data driven guy, you seem to quickly forget which horse has been wining the race .
May 23rd, 2011 at 10:06 am
You forgot those who were only 50% long, more or less, recently and “missed the greatest market rally in 4 generations” and may be following the market down for sentimental reasons.
Moral: Don’t follow anyone’s advice or believe anyone’s claims to the ‘right’ way to educate yourself to be a trader. Don’t invest in anything you don’t understand and don’t be afraid to sit anything out if you don’t understand what’s going on. What’s savings to the investor is only a commission to the professional. My elderly relative finally found a professional who is looking out for the future responsibly. This means there are honest investment advisors out there.
May 23rd, 2011 at 10:17 am
I’ve been living off my call that things will “Go more electrical“ for too long, the Rapture demographic looks wide open now, and ripe for me to change my business model.
But wait a sec… What about the “tax cuts will pay for themselves” guys, they’ve never been right and they’re all over the place. How do I get in on THAT action?
May 23rd, 2011 at 10:19 am
A “MOST EXCELLENT” piece today, Barry. Thanks..
May 23rd, 2011 at 10:20 am
In think the problem is that a lot of people either don’t have the time, intellect or knowledge to “create” their understanding of reality from facts. So they instead use the “if-it-sounds-good-it-must-be-true” approach. The result is that anybody who can “sound good” becomes an oracle – the perfect environment for snake-oil salesmen.
May 23rd, 2011 at 10:24 am
Here We (Don’t) Go Again: Revisting the Millerites in Light of 5/21/11
http://beingwrongbook.com/blog/here-we-dont-go-again-revisting-millerites-light-52111
May 23rd, 2011 at 10:26 am
Well, I guess, if you follow this argument, now is an incredible time to buy a house.
May 23rd, 2011 at 10:41 am
Much as I recognise your list and there’s merit to you skepticism you also have to ask to what extent and why they’ve been wrong – so far.
May 23rd, 2011 at 11:40 am
So, you’re grouping the Gold Bulls, Austerians and ‘thinly veiled partisans” alongside the Doom and Glommers/End of World Crowd?
Nice.
~~~
BR: Goldbrickers, not Gold Bulls . . .
May 23rd, 2011 at 12:28 pm
Not sure what is meant by “end of world”… but it’s been a wonderful decade investing with declining dollar, rising Asia, and peak oil as major investment themes. I don’t see any fundamental reasons why those investment themes should not continue working in the future, corrections notwithstanding.
May 23rd, 2011 at 1:02 pm
The-End-of-the-World stupidity is parallel to Donald Trump’s brief step into politics. The mass media publishes the story because the idiotic people who consume the information are either interested or curious to see it or hear it and maybe even idiotic enough to believe it to some degree.
The End-of-the-Worlders, the Donald Trumps and the media got what they wanted–the attention of the herd. The real winners neither gained nor lost anything–they simply retained their attention.
“The third-rate mind is only happy when it is thinking with the majority. The second-rate mind is only happy when it is thinking with the minority. The first-rate mind is only happy when it is thinking for itself.” – A.A. Milne
May 23rd, 2011 at 1:24 pm
Its the “recency effect” that no one can believe that Gold price can actually go down. Lot of people are comparing the last 10 year data and they have seen all Gold do is to go up. Because of this it is unfathomable to most that Gold can revert to mean which means significant declines from here. We have seen this movie before in housing market.
May 23rd, 2011 at 1:57 pm
It’s been clear to me forever that when it comes to the markets, politics, or just about any other topic, there are very intelligent people making very sensible arguments on both sides of every issue. Many of these people are more intelligent than I am and they have more information than I do. Therefore I usually find it a waste of my time to try and gather my own evidence in order to choose sides.
It makes more sense to go with the people who have a decent track record, while knowing that they will be spectacularly wrong at times (probably right after you join their team). The people whose opinions I avoid above all others are those who are absolutely sure they are right, and this screen weeds out about 85% of the people on the internet.
May 23rd, 2011 at 2:40 pm
Well, at least some of those people are making calls and making them public…whether they’re one sided or wrong. Then, there are blogs that just re-cycle other’s existing information and charts…..not quite taking any stand.
May 23rd, 2011 at 2:45 pm
Its the “recency effect” that no one can believe that Gold price can actually go down. Lot of people are comparing the last 10 year data and they have seen all Gold do is to go up. Because of this it is unfathomable to most that Gold can revert to mean which means significant declines from here.
.
Price drivers? Comparing the gold price increase the last 10 years to say the housing price increase from 1996-2006 is nonsensical if you don’t carefully consider the why. Gold will stop going up and decline when we finally abandon the current fiscal/monetary policy of intentional dollar debasement, trillion dollar deficits, and ZIRP. If I was you, I’d search these archives and read the 2 Brodsky notes. I won’t be holding my breath for any change anytime soon. See ya at gold 3000+
May 23rd, 2011 at 3:33 pm
I feel a little sad for some of the brainwashed fools who actually believed this crap and….
quit their jobs:
http://www.thedaily.com/page/2011/05/19/051911-news-may-21-1-5/
planned to kill their pets:
http://sonoma.patch.com/articles/springs-resident-takes-heat-for-plans-to-kill-pets-pending-doomsday
spent their retirement fund (while currently in retirement):
http://www.huffingtonpost.com/2011/05/23/robert-fitzpatrick-may-21-2011_n_865483.html
spent all of their money and their children’s college fund to “spread the word”:
http://www.nytimes.com/2011/05/20/us/20rapture.html
Meanwhile, Harold Camping has raked in 9-digit profits off of the beliefs of weak minded individuals:
http://www.cbsnews.com/stories/2011/05/20/eveningnews/main20064856.shtml
May 23rd, 2011 at 4:14 pm
BR:
You are quite intelligent and very knowledgeable, and I am always interested in your opinions and blog. But one Black Swan, and the world seems now to be a giant incubator for them, and over night you could be completely wrong. Ok, yes, at the moment, you are right, but as GBS said in Joan of Arc: “Pride goeth before a fall”.
Maybe not this week, or next, and maybe never; but I’d guess that however seemingly insignificant the odds are, they are relentlessly increasing. So many economists/financial analysts/hedge fund managers/CNBC talking heads missed the credit crisis even as it slowly rolled over their over leveraged, over confident heads that I have to wonder why anyone continues to listen to most of them.
May 23rd, 2011 at 5:57 pm
How many of you have invested in the stock market during ultra low Fed rates like now!
BR correctly recognized the ‘trough of the bea’r in March of 2009 and the liquidity flood where’ cash became trash’ and rode the mkt back recovering 90%+
I started investing seriously in early 80′s, self educated and manage my own investments. The (S&P) PE in 1982 was 7.3. When the PE started expanding until March 2000 (PE-43) and collapsed during dot.com bust. Now it is around 23. Bear mkt started in 2000 was diverted by Greenspan(Housing bubble) and now by Barnake with 0.25% trying to re-inflate the FIRE Economy and continues to fail!
The Fed rate was around 14-15% when I started wetting my toes in investing. No one could dream of rate of 1.0% or below! There was no Market to Model (Enron style)accounting. I survived the 2008 crash but hit by strong rebound during 2099 and 2010. Govt has significantly interfered into the market more than anytime except GreatD. The worst thing is the so called ‘capitalists’ are afraid of the true ‘Free market’ unlike in 70s,80s and 90s!
only those who understood (correctly guessed) the ‘convoluted rules ‘ of the game early on, got lucky!
It is hard to rationalize and argue when ‘perception created by well orchestrated spin masters’ becomes ‘reality’. Free market (at least relatively) as I knew during 80s and 90s DOESN”T exist! We all know major banks in West are INSOLVENT but the charade created by central Bankers has masked this fraud. No one wants to risk his wealth/gain by recognizing and calling that the Emperor has no clothes! But TRUTH is a force of Nature and will ascertain in the end!
Never confuse luck for talent!
May 24th, 2011 at 3:07 am
“The End of the World” is not something I concern myself with.
“The End of the World as we know it”, however, does get my attention as it is a certainty and likely to happen in my lifetime.
The entire world’s economies, financial systems, and monetary regimes are structured for perpetual exponential growth. Like any Ponzi scheme, the system requires ever greater amounts of money and debt to prevent collapse.
The problem is that exponential growth can not go on forever, especially in a world with finite resource limitations. Just like bacteria in a petri dish will eventually consume it’s food supply and pollute its environment, so the human race will encounter a brick wall of finite resources, in some cases declining resources.
Then the world as we know it will end.
May 24th, 2011 at 3:12 am
[...] – A losing bet: The end of the world. [...]
May 24th, 2011 at 3:39 am
I think the perpetual gloom and doomers fall into a few categories.
There are the Pessimists-by-Nature. These are the glass is half full and the water contains dioxin people
There are the Pessimists-by-Design. They know that Fear sells well and more so when it’s contrarian.
Then there are the Free Market Optimists. They can’t believe the capitalist government will step in and save the world again, so they predict mayhem.
There are the Conspiracy Anti-Capitalists. They see the Cabal destroying the little people for their own nefarious and greedy ends.
I suspect that many of the End-of-the-Worlders you are referring to fall into the Free Market Optimists category with a healthy dose of Pessimists by Nature. They see reality and assume that our system will follow the natural path. Then the government steps in and buys up the market. They are ridiculed in blogs like this one.
So, while you can gloat and mock the doomsayers, I am curious to know how long you think we can continue to run up debt and support a fundamentally corrupt and bankrupt financial system. If you believe we can go on for fifty years, then I am willing to start sipping your Kool-Aid (why fight it?).
If, on the other hand, you admit that more crises will befall us from time to time and the government will need to step in, continuing the cycle until the Big One or some miracle saves us from ourselves, then I will leave you your Kool Aid and your bull (shit) markets.
Of course, I concede that your job is not to be Right, but to be right. Why should you forsake making money in a bull market no matter how fundamentally unsound it is? That is your job. Is that what you are saying?