We will soon have a real time, real life test of whether ______ can create “stimulus” without reform or restructuring can lead to prosperity.

When _____’s debt detonates, what will ______ say then, I wonder?


I keep coming across this sort of crap, and I have to throw a flag on the play:

Making a claim that some policy is wrong because of some vague danger at an unspecified date in the distant future is, well, bullshit.

To the guys have been warning about hyper-inflation, the collapse of the dollar, the impending market blow up, an interest rate spikes, etc. — you have been wrong for 5 years now — are you going to just keep doubling down?

There does not seem to be a lot of method to your madness. How about some data-driven analyses instead of empty headed fear-mongering? I am not suggesting you have to be bullish on equities or any other asset class — but an intelligent thought process would be quite nice for a change.

Here is an idea — how about giving us some guidelines as to early signs that will show your thesis is starting to come true? Yield spreads widening, foreclosures, increasing, year over year earnings falling — maybe a little something that you can point to as a signpost on the road to your being eventually correct?

I keep seeing these empty headed comments that are the equivalent of “You’ll see someday.”

Come back when you have some empirical proof about being right about something for a change

Category: Markets, Psychology, Really, really bad calls

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

30 Responses to “Forecasts Are Not Analysis; They are opinion”

  1. capitalistic says:

    What’s even scarier is that some experts don’t know what inflation is, and the different kinds and catalysts for inflation.

  2. gregory barton says:

    Are these people to whom you refer people with any credibility? Why can’t you just ignore them?

    If there are any credible pundits in the group, please quote a few.

  3. mitchn says:

    Santelli. Caruso-Cabrera. Schiff. Crudele. Malpass. Faber. Broken clocks…

    • Angryman1 says:

      that is because they want a deflationary collapse. The rich will just go into cash and shut down production down globally whether they want to or not. The real answer is what happens to everybody else.

      a deflationary collapse would bring about a dollar collapse as well.

  4. key-bit says:

    Someone has to talk on all the 24 hour networks. It makes life much easier by tuning out the BS (nothing on TV is actually news anymore) and only reading legit info. Thank you for helping.

  5. Seems like there’s a lot of dumbassery on both sides. Playing Devil’s Advocate for a moment and casting Barry’s net in the opposite direction:

    Can we apply the same “quit making opinionated claims about future results that have failed to materialze for the last 5 years” logic to Federal Reserve forecasts of monetary policy success and a return to trend economic growth? Those also, invariably, have proven to fall far short of the mark.

    When do we stop listening to them? When will the Fed start questioning whether Quantitative Easing is an appropriate policy, given that it hasn’t delivered on what it was supposed to deliver on?

    Perhaps we should accept that our economic theories have, on the whole, utterly failed in terms of successfully analyzing the economy for the past 8 years or so, and scrap the whole profession, both sides of the debate? Because a debate which starts from faulty premises cannot hope to draw successful conclusions?

  6. Concerned Neighbour says:

    My only forecast since QE2 started is that the markets will never (be allowed to) fall again, so I’m not sure if I fall into the camp that has incurred Barry’s wrath. In any case, despite much scepticism from others, my forecast is correct so far.

    It’s all well and good to see the Nikkei gain over 50% in half a year. I would simply point out that there are negative consequences to this kind of blatant and seemingly ever-increasing, never-ending market manipulation. If it were a panacea, the concept of “free markets” of which we have clearly now rid ourselves would have been disbanded long ago.

    The primary consequence I expect is – pardon me – inflation well in excess of 2%… eventually. Given the depth and worldwide scope of the crisis, it should come as no surprise that inflation has yet to arrive. It may be many, many years before it does. But let us remember that monetary policy works with a considerable lag, and central banks have an abysmal track record at forecasting. For the latter reason, I believe the possibility of hyper-inflation is possible, though it only constitutes a tail risk at this time. For Mr. Bernanke to argue the risks are manageable is, in my view, akin to saying the Federal Reserve can perform magic.

  7. Chief Tomahawk says:

    I’ve followed Eric Janszen (over at the http://www.itulip.com/) for quite sometime. He was dead on about the toxic soup Wall St. was brewing and metastasized into the 2008 financial crisis. In fact I believe he made a public “time to short the market” call in 12/07. However, his “Ka-Poom” hyperinflation scenario has, thankfully, not come to pass thus far. [By the way, if China dumped $1 trillion in US Bonds tomorrow, wouldn’t Bernanke and his ‘infinitely expandable balance sheet’ be there to buy them up? Just don’t ask about his exit plan… its likely kept at the same place as The Ark: http://www.youtube.com/watch?v=Fdjf4lMmiiI

    Color me a skeptic, but I think we’ve avoided subsequent meltdowns (or meltups) thus far not because of anything economically-related, but rather because we haven’t prosecuted anyone thus far. The big banks are BIGGER than ever, breeding the same managerial ‘talent’ (enlisting engineers to create new financial products so long as the government is around to insure the payoffs) motivated by bonuses enlarged by Viagara, er, risk-taking.

    Just imagine a pol who’d slap the cuffs on those ill behaved: in a tantrum the industry would dump, dump, and dump. 401ks would get hammered, unemployment would soar, the chief in charge would see his “approval ratings” tank for day after day, with the media, hurt by the absence of an unending stream of Capital One Viking ads to provide revenue (due to a credit meltdown), would skewer the poor leader over and over again.

  8. biotrekker says:

    No need to be rude. Here is some analysis:

    Japan’s debt is > 200% of GDP, but, more importantly >20 x central government tax revenues. Interest expense alone consumes about one quarter of central government revenue at 1% interest. Japan is targeting 2% inflation, but the reason that Japanese investors are OK with 1% JGBs is that prices decline 1% per year resulting in a real yield of at least 2% (also JGBs are the only asset class that hasn’t lost them money vs. the Japanese stock market and real estate). However, now they will require a higher interest rate to account for inflation (if Abe is successful). Meanwhile, aging retirees will be taking money out of the system, not saving more, while the overall population shrinks, meaning less people putting money into the system (this is the point where a Ponzi scheme typically implodes).

    Kyle Bass of Hayman Capital spells out the thesis very well in several talks that can be easily found on youtube. What kills me is how the Keyensians insist that a country with this amount of debt, that has manipulated interest rates so low for so long, can be accused of not doing enough easing, not enough stimulus, of taking their foot off the gas too soon. Well, Abe is “full in.” Let’s see what happens.

  9. kaleidic says:

    Jeremy Grantham, Seth Klarman, Lacy Hunt, Gary Shilling, David Rosenberg, Paul Singer, John Hussman, among others are all quite credible analysts who have presented substantive analyses showing why the FRB’s policies are wrong and destructive. They are definitely not “empty-headed fear-mongerers.”

    As Seth Klarman has said, “The absence of an immediate crisis does not mean we won’t eventually face one,” all it means is that the can has been repeatedly successfully kicked down the road. This state of affairs may continue for some further time to come, or it may not. The odds and historical evidence are that it will not.

    • jib10 says:

      “The absence of an immediate crisis does not mean we won’t eventually face one,”

      This is a tautology. Yes, it is 100% guaranteed that we will face a crisis eventually. Guess what, trees don’t grow to the moon, everything ends and it ends in a crisis.

      I am old enough to remember that when Reagan’s supply side economics was being implemented, old timer’s who had been through the depression said it was a bad idea and predicted it would all end in a bank crisis and deflation. They were 100% right and it only took 25 years.

      FDR’s demand side economics ended after 40 years in stagflation. If we did what we need to do, which is switch from supply side to demand side, then eventually that too would end in stagflation some time in the next few decades.

      But the supply side folks have lot so power and want to keep that power so we are trying the Japanese way of not allowing bank failures, bailing out finance (supply side) instead of focusing on jobs (demand side). The hope is to grew enough that people can pay off their debts without defaults. This involves a massive shift of private debt to public debt but hey, anything to keep the banks in biz.

      Is this sustainable? Of course not because NOTHING IS! The question is when does it end. Japan has been “a bug looking for a windshield” for over 20 years. The USA has twice as big economy and more than twice as deep capital markets. You do the math as to how long this can go on.

  10. obryzum says:

    Barry speaks from the perspective of a trader who also maintains a daily blog. From such a position five years might seem like a long time (“you have been wrong for 5 years now”). From a different perspective, five years might seem like a very short time. I think the real question is whether the trends we see are are sustainable or unsustainable, and whether we should expect the trigger for a change of direction to be a sudden event or a gradual shift. We need a “Big Picture” perspective that considers all of these possibilities and probabilities, no?

  11. Angryman1 says:

    The only way you can have hyper inflation is if a lot of money is getting out there, into the market place. QE does not get money out there. This amazes me, that people cannot see this.

    Considering that real government spending is declining, this is putting even less money out there. Debt is another man’s value. If debt is created, somebody is getting value.

    This may shock people, but deflation, not inflation is what would cause the collapse of the dollar. The US is the economic engine of the world and its value is tied to that engine. Capitalism is not a system that does well in finite situations. I am pretty sure that Jeremy Grantham, Seth Klarman, Lacy Hunt, Gary Shilling, David Rosenberg, Paul Singer, John Hussman along with Santelli. Caruso-Cabrera. Schiff. Crudele. Malpass. Faber know this. How to keep the capitalist system going? Deflate it and control it. Destroy production and shorten life spans. Reduce population growth while the rich capital owners use deflation to keep their savings intact. This is not a overnight process and will take decades. Hopefully over that span, innovation resumes and the current obstacles hitting growth are innovated away. IMO, we don’t have that right now. So lets get dollar collapse and default out of the way quickly. Now they have issues how to police a wasteland such as that, but that problem can wait to the situation arises from their pov.

    Obviously the majority of the flock don’t agree with this and instead are trying to “muddle” which the FRB and global central banks are operating in.

  12. [...] Are Not Analysis; They are opinion” http://ritholtz.com/blog/… by [...]

  13. jonas says:

    If you forecast something way out in the future, and you want credibility, you should give us some shorter term signs. Unless you explicitly expect it not to happen right away, in which case, you should tell us it’s going to get better before it gets worse. Otherwise it’s just a creed, not an analysis.

  14. MrDodge says:

    I don’t think this comment is fair. Let’s take the example of Peter Schiff (not someone I like, but that’s irrelevant)

    US Housing Market collapse – tick
    Hyperinflation – no sign yet
    Dollar Collapse – no sign yet
    T bond market collapse – no sign yet
    Aussie Dollar bull – tick
    China bull – tick

    So, a mixed record. Certainly he made the right call on US housing, and for pretty much the right reasons as well.

    How about mainstream economists finally eat some humble pie for failing to predict the financial crisis?

  15. Moss says:

    Forecasting is different since the collapse especially on the macro level. . Many underestimated the extent, duration and depth of intervention by the world’s Central Banks. These guys are now the main players until they explicitly say they are not. They did not fully understand all the hypothecated leverage spread around like peanut butter. They do now.

  16. postpartisandepression says:

    But there are forecasts that can be made

    1) while the fed pumps money into the system it may keep it afloat but it will not trickle down to create jobs
    2) while regular people can’t find jobs the economic downturn will continue and deficits will get bigger
    3) if the government hired more people (seems we need all those air traffic controllers and meat inspectors) to do the jobs we desperately need (teachers? any one) that WOULD create jobs
    4) and if the government started spending those billions of dollars inspectors say we need to invest in infrastructure to keep us competitive that would also create jobs especially since the interest rates for all this are almost zero
    5) viola the private sector would again start hiring because all those extra dollars would actually be going to buy things ( not to mention food, rent) instead of sitting in the big banks and being used to speculate in the market.

    This is not rocket science- nor is it hard.

  17. [...] Ignore forecasts. They are nothing but professional-sounding predictions and guesses. [...]

  18. victor says:

    Taleb is dismissive of prediction and models (explicitly in finance and econometrics, and implicitly almost everywhere). For instance, Why on earth do we predict so much? Worse, even, and more interesting: why don’t we talk about our record in predicting? Why don’t we see how we (almost) always miss the big events? I call this the scandal of prediction. And In the absence of a feedback mechanism [not making decisions on the basis of data] you look at models and think they confirm reality. He’s right; people want forecasts in economics, and so economists give forecasts, even knowing they’re not particularly accurate. Also, the culture of academic research in numerous disciplines encourages theoretical modeling which is never seriously compared with data.

    Also: if you predict, predict OFTEN…

  19. [...] Ignore forecasts. They are nothing but professional-sounding predictions and guesses. [...]

  20. In 1980 I was wrong about the extended depth and length of the Recession(s) ‘cuz I didn’t believe Volcker and Reagan had the balls to go as far as required to break the back of inflation. I knew the social cost (very high unemployment, failed firms & family breakups) would be extreme and not worth the political fallout. But they did it!

    This time around there was a camp (Rosenberg, Hussman, Achuthan, Shilling, Shiller) who knew things were as bad as it gets fundamentally (I define it as a Structural Greater Depression), but they completely misjudged the lengths Congress & the FOMC would go with fiscal & monetary policy. Their extraordinary measures (five trillion dollar deficits, QE, TARP & ZIRP) have combined to successfully avert a Greater Depression. Instead the USA sported a Severe Recession and damped recovery … somewhat worse than it had to be due the paring back ($400 billon) of the Spring 2009 stimulus pkg.

    real & structural gdp chart: http://trendlines.ca/free/economics/RecessionIndicatorUSA/USA-TRI.htm

  21. [...] Ignore forecasts. They are nothing but professional-sounding predictions and guesses. [...]

  22. nmaier says:

    Barry, you really piss me off. So you’re going to “throw a flag” because you say you can’t see any tangible evidence of what this destructive monetary policy is doing? I guess you don’t shop at the grocery store, buy health or auto insurance, rent an apartment or spend money in any tangible transaction where you would be exposed to real inflation. All of these categories are experiencing real increases and real inflation, much higher than the manufactured CPI of the Fed. If the Fed calculated inflation like we did in the 80’s, you’d see the inflation. Further, job creation sucks, no manufacturing jobs are being created, only lousy service sector jobs that don’t produce anything and 500,000 people left the labor force last month. Whee! Unemployment dropped! Larry Kudlow was amazed a few weeks ago that all sectors of the DOW utilities, transports, financials, retail, were all up and that is rare. Duh! Do you think all this cheap money might be creating an asset bubble in the stock market if all sectors are going up simultaneously? The same people that said everything was hunky dory in 2008 are the same Cassandras now. What asset bubble? What new housing bubble? The fact is, it takes a long time to destroy what was once the world’s largest and most profitable economy that holds the world’s reserve currency. But it is happening, slowly, but surely. Look for Japan to be the catalyst for a global meltdown with their recent Frankenstein monetary policy and their 500% debt to GDP ratio. McDonalds and Louis Vutton both raised prices in Japan recently an average of 25%. How is that for tangible evidence? Are you gonna throw a flag on that one too?

  23. [...] it doesn’t mean we have to listen. The Big Picture sums it very well. Unless these forecasters have some analysis that makes sense to back up the talk, it’s just [...]