Mindless and Clueless

Admittedly, I've been somewhat perplexed. I keep wondering what planet -- or illicit substances -- equity traders are on. You know, the ones who seem to think that every market pullback, no matter what the reason, is a buying opportunity, despite an increasingly shaky fundamental, technical, and macroeconomic backdrop that is hard to miss.

But I think I may have the answer. If the following post, ‘"Morning Rant: What ARE [U.S. Economists] Looking At?’" from the Wall Street Journal's Real Time Economics blog is anything to go by, maybe these mindless buy-bots have been relying on the insights of economic and other "experts" who are even more clueless than they are:

Economists and policymakers, brace yourselves: the eye of the storm has passed and the headwinds are now gathering for another brutal battering by investors, politicians and the broader public. We’ll turn the mike over to T.J. Marta, founder and market strategist with Marta on the Markets, whose morning note today succinctly sums up sentiment at the moment. Says Mr. Marta:

“In light of the recent developments in Greece, the Fed’s Dennis Lockhart was sheepish at a conference yesterday that had the stated theme, ‘after the crisis’. He admitted that the theme was chosen earlier in the year when Europe’s sovereign debt troubles were not fully anticipated. In defense of the folks choosing the title, the conference was about the mortgage crisis, not general financial markets.

“However, Lockhart’s admission as a member of the Fed about not fully anticipating sovereign issues is telling nonetheless. So we’ve got at least one member of the Fed admitting he didn’t appreciate the issue. We’d throw [Jeffrey] Lacker and [Thomas] Hoenig in the same pile. And it’s not just the Fed members. This week, a major U.S. bank [Morgan Stanley] backtracked on its rate call, also using the cover of new developments in Greece. We recently went to a conference at which three U.S. economists from three major banks spoke, figuratively tripping over each other in calling for the first Fed rate hike by [the third quarter]. None mentioned Greece. None mentioned U.S. federal fiscal policy uncertainty, especially with the November elections. None mentioned the woes of U.S. state and local governments, holes in the budgets of which keep opening up. None mentioned the potential effects of Chinese tightening, although when pressed by a question from the audience, one economist did manage to stammer some lip service about the potential impact on the U.S. economy (his rambling told us he had not considered the impact in more than passing.)

“It seems to us that U.S. economists in positions of great power to shape public policy and market expectations are failing to do their job. They seem to be stuck in U.S.- and econometrics-as-the-center-of-the-universe paradigms. We’d caution clients against following the shtick of economists calling for a steady-as-she-goes economic recovery and strongly urge them to deeply probe representatives espousing these views. Perhaps more importantly, we’d caution clients to earnestly consider the fat tail of a double dip, or at least a below consensus recovery in determining one’s investment strategy.”

Yikes. Add in the Senate’s vote on Tuesday to force the Federal Reserve to disclose specific details of its actions during the financial crisis (part of the “audit the Fed” push), and it may now only be a matter of time before Fed Chairman Ben Bernanke is back on “60 Minutes,” trying to win back the hearts and minds of a disillusioned public.

Comments

[nowhereman]

I believe that this topic, Mindless and Clueless Economists, was handled quite well in Yves Smith's book, ECONned.

[Marion Shaw]

Michael, I would still like to know what little ole
ladies like myself, on fixed pensions and social
security (really low level social security) should plan
to do other than notify my grown children, who are
equally concerned about their future, that I am
divesting everything into gold coins and will live
in their basement. Not only will that give me an
early stroke, but will ruin their marriages and for
the life of me, I cannot really see what a bag of gold
is going to do for any of us in the short or long run.
Historical accounts tell us that the most valuable
item in Europe and Asia after world war II was a
cigarette, followed by silk stockings. Any advice is
welcome with no liabilities attached as an advisor.

[TRS]

Marion

Seek a qualified advisor, who may be able to navigate the markets or find some fixed income opportunities. If I can help let me know. We share the same last name.

Tim

http://timsmarketblog.blogspot.com/

[no stocks 4me]

This is why they love uncle Ben's BS, ( the banks, market traders, and brokerage houses)along with the ra ra stock market booooya heads on CNBC and the bond babies.

Screw anybody that actually paid their bills on time and saved some money for retirement to get a better rate on.

If this insane scenario comes to pass, hell with gold, only the young, strong and healthy able to move and shoot, fight, hunt, fish, and survive will make it anyway. old ladies or old men for that matter with gold, won't have it for long, or won't be able to go out to spend it anyway.

Besides there ain't enough actual gold for everybody, no matter what the price may be. And forget the paper certificates, they won't be worth crap either if dollars aren't.

[Rocky]

Marion: Gold coins may one day be useful for bribing police, border guards and issuers of travel papers if things really get ugly, as they did in Nazi occupied Europe during WWII. But at your age, sleeping pills might be the better choice. Let's hope it doesn't come to that. I would be very leary of "financial planners". Before you know it, they may have you signed up for a high fee variable annuity.

[no stocks 4me]

right on Rocky esp the comment about the "financial planners". I keep getting these "free" dinners or luncheon requests from them lolol.

[Eddie in Estacada]

Never put all or most of your money in one type of investment.
Many of these "financial planners" (there are no requirements to call yourself one), will run off with your money.
First rule of investing is diversify. Ask Bernie Madoff's victims, who forgot that rule.

[Marion Shaw]

Rocky: don't worry. I sleep well as a rule and don't
use pills unless I travel internationally, which is
rare. I don't trust the stock market; I don't trust
financial planners; I don't trust banks, but I still
use them and I don't trust the financial gurus, except
I think Panzer runs a fairly impartial operation.
I don't trust gold because credible bankers in 1929
said the flight of gold to Europe helped bring down
the market. I do trust credible historical accounts,
and it is true that the Jews who had cash and diamonds
(and maybe gold) bribed their way out. The real problem
is where will we bribe our way into this time? God
forbid it should come to that, but if things keep
looking like they do, even a paranoid might be
justified for some mild concerns.

[roger]

@Marion: rule of thumb. if its to good to be true,run like hell
Financial advisers are smart, and very aggressive,
my 94 year old sister nearly payed the price except we were smarter,
and I'm glad to sat that we got the law after them

[Steve]

Marion,
Silver coins are better as if it came down to it, a dime could buy you food or allow you to bribe your way somewhere.

Check out Geoff Castle's excellent blog about how to buy and sell gold and silver to maintain the value of your capital. http://marketdepth.typepad.com/marketdepth/2010/04/the-shoeshine-fixed-income-fund-series-b.html

Based in Canada, he has stuff that doesn't apply to the US. But, if you wanted to get aggressive, he just predicted that our arrogant Canadian banks are about to suffer a major fall - 80% drop. Short the Canadian banks? That's a little aggressive.

It is probably useful for people to move in with family so as to sell real estate and preserve capital. If you can take care of the grandkids and cook, etc. while still staying out of the way, why not?

This is getting scary.

[Steve]

Back to Michael's original column topic. It comes just at the right time. All this good news (despite all the bad that I know about) makes you doubt your own analysis.

But he shows how the group mindset occurs. Right from the Fed on down. What's missing though is the role of the media. Right now, they're writing all these good news stories, based on myopic comments from so-called thought leaders. Media repeat this. Then, suddenlly, out of the blue, commercial real estate (or Greece, or house prices or you name it) craps out and all predictions are out the window.

It's unfair for the population because they're not being given the information they need to make good decisions. Eye of the hurricane is right: we're in 1931 right now where that Austrian bank caused the second downleg of the Great Depression. As Mark Twain once said, "History doesn't repeat itself but it sure does rhyme a lot."

[dph]

No, gold may not save you. But then dollars, Social Security, Pensions, 401-k plans, stocks, real estate and other investments may not be able to save you either.

Marion: Do you know any other women like yourself? I always thought that if I found myself in a situation like yours that I would like to live in a house shared by others facing the same problem. Kind of a communal housing where women in similar situations could look after one another and share rent and companionship. Marlena De Blasi, in one of her books talks about a place like this that she visited in Italy. (Or maybe you could just find a roommate?)

[nowhereman]

Right you are Steve. The question is, how bad does it have to get before we see a paradigm shift. What kind of damage are they prepared to inflict before they see that they have got all wrong.

[greg]

This piece is from todays Gar tmen Letter:
"Earlier this week we called this
the “Zimbabwe-isation” of the global capital market,
where equities and gold move in tandem, one with the
other. This process continues, and the equities
markets around the world are beginning to understand
this phenomenon. At the moment, when it comes to
equity investment, nothing else matters. Earnings?
They mean very little: Economic data: They mean even
less: Market psychology? Well perhaps that is of some
modest importance, but trumping all is liquidity: Gold
up; currencies down; equities up… that’s the marching
order of the day the week and the month:..."

[Vinz Klortho]

“It seems to us that U.S. economists in positions of great power to shape public policy and market expectations are failing to do their job. They seem to be stuck in U.S.- and econometrics-as-the-center-of-the-universe paradigms

They are not failing to do their jobs. They simply don't understand Modern Monetary Theory (MMT). They are a bunch of incestuous Neo-liberal has beens.

Vinz Klortho

[sharonsj]

Hey, this old lady is on Social Security too. But I own my own place--it's paid for--and I have tenants (not that they often pay their rent). I would not sell everything and buy gold because (1) you can't eat it and (2) it's not liquid if things really fall apart. I prefer a range of useful items that are worth trading as well. I have a ton of how-to books, jars of coins, lots of canning and craft equipment, as well as lots of tools. Plus pets that keep you warm in the winter. It's not that hard to survive on less.